Dear Fellow Shareholders:
As we have articulated over the past several years, we are focused on delivering long-term, profitable
growth via our dual – core and fund – operating platforms.
We are accomplishing this goal by:
Building a best-in-class core real estate portfolio with meaningful concentrations of assets in the
nation’s most dynamic street-retail corridors;
Making profitable opportunistic and value-add investments through our series of discretionary,
institutional funds; and
Safeguarding our company’s growth trajectory by maintaining appropriate leverage levels and interest
rate protection.
2013 HIGHLIGHTS
To that end, last year, we demonstrated the high quality of our existing core portfolio by:
Generating 7.2% same store net operating income growth for the year, including the impact of two
accretive re-anchoring projects; and
Increasing the leased occupancy rate by 270 basis points over last year to 97.1%.
We further differentiated our core portfolio by:
Acquiring $220.9 million of high-quality street retail assets, located in the vibrant live-work-play cities
of New York, Chicago, and Washington DC; and
Shedding a non-core shopping center for $18.4 million, leaving us with only a handful of legacy assets
with growth profiles that are inconsistent with our goals.
We maintained discipline in our fund platform by:
Monetizing $204.3 million of stabilized Fund II assets; and
Acquiring $123.2 million of opportunistic and value-add assets – with attractive risk-adjusted returns
– on behalf of Fund IV.
We grew our company on a substantially leverage-neutral basis by:
Flexibly funding our acquisition activities through a combination of disciplined common share and
operating partnership unit issuance, opportunistic capital recycling, and conservative borrowing.
And, in doing so, we:
Generated 15.4% FFO growth for the year, net of $0.04 (3.8%) of non-cash executive retirement
expense; and
Raised the quarterly dividend by 27.8%, over 12 months, to $0.23 per share for the fourth quarter of
2013.
Our stock ranks among the top on long-term performance. Based on our NOI and FFO growth, together
with observed cap rate compression, it is clear to us that the value of our real estate appreciated significantly
last year. Nonetheless, our stock price closed the year at $24.83 per share, generating a disappointing 2.4%
total shareholder return. In the short term, with many segments of the retail sector generating similar NOI
growth, it can be difficult to quantify the quality advantage. However, in the long run, given the inevitable
changes in retailing, we are confident that our portfolio contains the types of assets that retailers will want
to occupy and that the investment community will want to own. Given the illiquid nature of real estate, we
accept that it is our responsibility to take the long view. Fortunately, over any extended period of time, our
shareholders have been well rewarded for our continued bias toward higher quality assets, as indicated
below:
Figure 1: Total Return Comparison, for the Period Ended December 31, 2013
Period
3 Years
5 Years
10 Years
15 Years
Acadia’s
Total Return
50.6%
111.5%
205.9%
972.7%
Peer Group’s
Total Return:
Straight Avg.
36.1%
94.6%
74.7%
319.3%
Peer Group’s
Total Return:
Median
39.6%
65.5%
60.9%
238.4%
Acadia’s
Rank Among
Peer Group
#2 of 12
#3 of 12
#2 of 10
#1 of 9
CORE PORTFOLIO:
CONTINUING TO BUILD A DIFFERENTIATED PORTFOLIO
Post recapitalization, we are investing in primary markets. Fifteen years ago, following our
recapitalization of troubled shopping center REIT Mark Centers Trust, the bottom half of our core portfolio
was admittedly comprised of mediocre assets located in secondary and tertiary markets, including Dothan
AL, Sumter SC, and Tunkhannock PA. Over the next several years, we aggressively pruned our asset base,
disposing of low-growth/non-core properties and rotating into those of a higher quality. In doing so, we
successfully elevated the quality of our portfolio.
Our growth is not for growth’s sake. More recently, our asset recycling and growth activities have been
influenced by observed secular changes in retailing, including the growing importance of omnichannel
retailing. We anticipate that, over the next several years, the evolution of retailing will result in further
separation between the “have” locations and the “have nots.” Furthermore, we anticipate that the haves –
in our opinion, certain street-retail corridors and the highest-barrier-to-entry suburban locations – will be
better positioned to increase in value and better insulated from downside risks. Our priority is to make sure
that five, ten, and 15 years into the future, our assets are still counted among the haves.
We have formulated a disciplined growth plan. Thus, at the beginning of 2011, we began to implement
a multi-year growth plan, targeting approximately $200 million of high-quality net additions per year.
Given our relatively small size, we knew that our acquisition goals would enable us to move the needle but
would not distract us from – or dilute the contributions of – our opportunistic and value-add fund platform.
We are focused on upper-quartile acquisitions. Since then, we have completed, or placed under contract,
$606.8 million of core acquisitions, resulting in a near doubling of our core portfolio over approximately
three years. More importantly, we have upgraded and transformed the composition of our asset base with a
continued emphasis on street/urban retail, which now comprises approximately half of the portfolio’s pro
rata gross asset value, up from approximately 17% as of year-end 2010. These new assets have reloaded
our portfolio’s top two quartiles, comprising approximately 90% of what we consider to be our top quartile
and 60% of our second. In short, our already-solid portfolio has only gotten better.
We can measure our progress by increased rents and elevated demographics. For example, since year-
end 2010, our high-quality street/urban acquisitions have driven a 50% increase in our portfolio’s average
base rent to $22.10 per square foot. By disposing of the portfolio’s bottom 5%, we could further increase
the average base rent to $25.55 per square foot. This compares to an average of $16.19 per square foot for
our peer set as of year-end 2013. Additionally, our acquisition activities have driven a 62% increase in our
portfolio’s average three-mile population, from a solid 188,000 to more than 300,000. At the same time,
we have maintained strong average and median household incomes of approximately $100,000 and
$80,000, respectively.
Our investment strategy is location driven. Today, more than 80% of our core portfolio’s pro rata gross
asset value is concentrated in the nation’s top 10 MSAs. This includes a 37% concentration in the New
York, NY MSA and a 30% concentration in Chicago, IL. Furthermore, approximately 45% of the core
portfolio’s value is concentrated in superzips. These are the top 5% of zip codes where people rank highest
on a combined scale of income and education. Included among them are:
the towns of Greenwich and Westport in Fairfield County, Connecticut;
the Flatiron District, Noho, and the East Village in Manhattan;
the neighborhoods of the Gold Coast, Lincoln Park, and Lakeview in Chicago, Illinois; and
Georgetown in Washington, DC.
On average, across Acadia’s superzips, 70% of adults have earned a bachelor’s degree and the median
family income is approximately $158,000, as compared to 27% and $54,000, respectively, for the United
States’ non-superzips.
CORE PORTFOLIO:
CREATING STREET RETAIL SYNERGIES
We have a size advantage. Unlike our mid- and large-cap peers, we are able to accretively add assets in
the nation’s prime street-retail corridors in increments of $10 million to $100+ million, building meaningful
concentrations in the highly-fragmented street-retail markets of New York, Chicago, and Washington DC.
New York
Figure 2: Acadia’s Key Streets & Stores
Neighborhood
Location
Tribeca
Soho
Bowery
Union Square
Greenwich Ave, Greenwich
Main St, Westport
N Michigan Ave, Gold Coast
Connecticut
Rush-Walton, Gold Coast
Chicago
Clark-Diversey, Lincoln Park
Halsted-Armitage, Lincoln Park
Wicker Park
Washington DC M St, Georgetown
Key Tenants
Brushstroke, Citibank, HSBC
3x1 Jeans, Paper Source
John Varvatos, Patagonia
Dr. Martens, Open Kitchen (coming soon)
Polarn O. Pyret, Restoration Hardware
TD Bank
Ann Taylor Loft, Tommy Bahama
Barbour, BHLDN, Brioni, Burton, Lululemon,
Marc Jacobs, Sprinkles, YSL
Ann Taylor Loft, Express, Langford Market,
Starbucks, Trader Joe’s, Urban Outfitters
American Apparel, BCBG Max Azria,
Bluemercury, Bonobos, Club Monaco, Intermix
Aldo, Carhartt
American Apparel, Banana Republic, Coach,
Juicy Couture, Lacoste
We are assembling a prime Gold Coast (Chicago) portfolio. Last year, we increased our foothold in
Chicago’s Gold Coast neighborhood by acquiring $153.1 million of assets located on North Michigan
Avenue and within the nearby Rush/Walton corridor. And thus, in less than three years and through a series
of four transactions, we now control a significant stretch of Walton Street, including two key corners at its
intersection with Rush Street. Over the next several years, tenants including YSL, Marc Jacobs, Brioni,
Barbour, and Burton are contracted to deliver strong rent growth, fueling strong same-store NOI growth.
We can magnify strong contractual growth by periodically marking rents to market. As these tenants’
leases expire, we will then have opportunities to mark rents to market. Although past performance is no
guarantee of future results, rents on North Michigan Avenue increased by 49% to $485 per square foot
between 2006 and 2013, and those on nearby East Oak Street increased by 80% to $315 per square foot.
Looking ahead, given the changing retailing landscape, we believe that high-quality, high-barrier-to-entry
street retail locations, such as these, are better positioned to experience robust upward momentum in market
rents, as retailers continue to demand flagship stores with unique branding opportunities located in close
proximity to a dense shopping population.
We are building scale in Georgetown (Washington DC). In addition to Chicago, we are also achieving
similar scalability in Washington DC, where, earlier this year, we added a seventh asset to our Georgetown
collection – located at the submarket’s 50-yard line, M Street and Wisconsin Avenue – for $11.8 million.
We are strategically expanding in Lower Manhattan. Closer to home, during 2013, we acquired $56.0
million of street-retail assets in Lower Manhattan, including a $37.0 million retail asset situated at the base
of a residential cooperative in Tribeca. This property is located one block north of the heavily-trafficked
Chambers Street 1-2-3 subway stop, which ranks as one of the city’s richest with a median income of
$205,000. The neighborhood’s affluent demographics have attracted fashion retailers, including J.Crew,
which operates both a men’s store and a standalone suiting shop, and Thom Browne. Not only is the long-
term trajectory of this prime submarket strong, but also the square block of retail that we acquired is an
ideal combination of high-quality, long-term cash flow and above-average, near-term growth driven by the
re-tenanting of a couple of spaces. Through an off-market, operating partnership unit transaction, we
acquired the retail component of this loft conversion from the developer that had the vision to reposition
this former warehouse property during the 1970s. We are pleased that the sellers contributed the asset to
our growing street retail portfolio, and we plan on keeping their asset in good company.
FUND PLATFORM:
ADDING OPPORTUNISTIC AND VALUE-ADD INVESTMENTS
We have a solid track record of value creation. Our fund platform has been our opportunistic and value-
add investment vehicle since 2001. Throughout our many years as a fund manager, we have never lost sight
of the fact that discretionary capital is a great asset as long as we remain disciplined in its deployment.
We stick to our knitting. To that end, during 2013, we completed $123.2 million of fund acquisitions.
Although this volume was below our stated goal, our acquisition activities increased during the fourth
quarter. Our investments were consistent with our four key fund strategies: street retail, emerging urban
markets, distressed retailers, and opportunistic. Last year, the opportunistic category included both
distressed debt and high-yield investments. In light of current market conditions, we remain selective about
new developments, choosing, instead, to focus primarily on either well-located street/urban assets with
meaningful re-leasing upside or high-yielding assets with arbitrage opportunities.
We are recycling anchors – and increasing rents – on North Avenue (Chicago) and the Upper East
Side (Manhattan). For example, on the re-leasing front, we acquired a multilevel property located at the
heart of Lincoln Park’s thriving North Avenue corridor. This street-retail property is currently occupied by
Restoration Hardware and Sephora. However, we expect to have a near-term opportunity to redevelop the
property, as we did a half mile to the east at the site of a former Borders Books (soon to be Design Within
Reach). In doing so, we can create flagship-quality space for any of the several retailers interested in joining
Apple, Forever 21, and Whole Foods Market, among others, in this heavily-trafficked, established
submarket. Last year, we also acquired a highly-visible asset located at the corner of 67th Street and Third
Avenue in Manhattan’s Upper East Side neighborhood. This urban market continues to strengthen,
bolstered by several new retail entrants including Nike, Reebok, and designer Carlo Pazolini. Our asset’s
street-level retail space is currently occupied by Lucky Brand Jeans at a below-market rent. Their lease
expires this year, providing another near-term opportunity to mark rents to market.
We can capitalize on arbitrage opportunities. By taking advantage of market inefficiencies, we were
also able to opportunistically add two suburban shopping centers, located in the Washington DC metro area,
to our high-yield portfolio during 2013. In both instances, we negotiated a long-term lease extension with
an expiring anchor tenant, thereby stabilizing each property’s cash flow. In doing so, we were able to attain
attractive financing and generate levered yields in the high teens.
FUND PLATFORM:
DELIVERING STRONG ORGANIC GROWTH FROM EXISTING INVESTMENTS
We are disciplined sellers. Given the strength of the capital markets, last year, we monetized $204.3
million of stabilized fund assets in addition to $445.7 million in 2012. Now, having sold the majority of our
stabilized assets, the balance of our fund portfolio is poised for strong organic growth over the next several
quarters.
We develop in established and emerging (urban) markets. For example, approximately 25% of our
current fund portfolio is comprised of development assets. Our development pipeline includes a diverse set
of projects, ranging from shopping center developments in the high-barrier-to-entry New York suburbs to
street-retail redevelopments in both established and emerging markets, such as Georgetown in Washington
DC and the Bowery in Lower Manhattan. Our largest development project, City Point, is also located in an
emerging market – Downtown Brooklyn. Since 2006, this neighborhood has been transformed by $5+
billion in private investment, which has led to the development of 8,000 units of mixed-income housing,
more than 1,000 new hotel rooms, and 1.5 million square feet of retail space. More recently, it was reported
that JPMorgan is planning to move 2,000 employees from Lower Manhattan to the MetroTech Center, a
16-acre campus located in the immediate vicinity of City Point. Additionally, Macy’s announced plans to
renovate and reimagine its flagship Fulton Street store.
We are building a transformative mixed-use project at the convergence of Brooklyn’s two main
thoroughfares. Today, City Point’s second phase – which will add approximately 625,000 gross square
feet of retail space to New York City’s third-busiest shopping district – is approximately 50% complete.
Last year, our leasing and development team, led by Washington Square Partners and Curbcut Urban
Partners, reached an important milestone by executing a lease with Target for the retailer’s smaller, city
concept to be located on the project’s second level. In doing so, we have completed the lease up of the
project’s upper levels. As previously announced, Target will be joining Century 21 and Alamo Drafthouse
Cinema, on levels three through five, creating a critical mass of new fashion and entertainment space at the
intersection of Fulton Street and Flatbush Avenue. On the basis of square footage, our project is now 65%
pre-leased, with the remaining availability concentrated on the street and concourse levels. However, on
the basis of anticipated rental revenue, the project is only 40% pre-leased, enabling us to continue to benefit
from the ongoing strengthening of Downtown Brooklyn and Fulton Street.
We balance development projects with cash-flowing assets. Our development pipeline is complemented
by our high-yield portfolio, which today comprises approximately 25% of the value of our fund platform.
The assets in this portfolio are fairly stabilized, with some incremental leasing opportunities, and are
currently generating a blended levered return in excess of 20%.
We generate value through re-leasing activities. The balance of our fund portfolio is primarily comprised
of lease-up assets, more than half of which are street-retail assets located in markets where rental growth is
often exceeding our expectations. At the same time, we are also seeing solid contributions from our dense-
suburban properties. For example, last year, at our New Hyde Park retail center in Nassau County, Long
Island, New York, we executed leases with PetSmart and two small-shop tenants – at lease spreads in excess
of 60% – driving occupancy from 40% to 89%.
BALANCE SHEET:
MAINTAINING STRONG METRICS FOLLOWING GROWTH
Capital allocation is one of our strengths. As a company that is focused on long-term, responsible growth,
we are also focused on maintaining a healthy balance sheet. Last year, through an appropriate blend of
disciplined equity issuance – at an average net price of $26.92 per share/unit – and recycled capital from
asset sales, we were able to achieve our acquisition goals on a substantially leverage-neutral basis. During
the first half of the year, we raised capital through our at-the-market equity program; however, we pressed
pause during the latter half when our stock price became disconnected from asset values. Nevertheless, with
plenty of dry powder, we were not sidelined for long. Instead, we completed a $37.0 million transaction by
issuing $33.3 million in operating partnership units – demonstrating an alternative means for us to add
valuable assets to our portfolio on an accretive basis – plus $63.0 million of additional acquisitions.
Our growth hasn’t come at the expense of leverage. At year-end 2013, our net debt to EBITDA ratio
was 4.9x, one of the lowest in the shopping center sector, and our fixed-charge coverage ratio was 3.1x.
Although we would prefer to maintain these levels in the new year, if necessary, we could fund our 2014
acquisition goals simply by increasing our leverage, and we would still remain among the lowest levered
companies in our sector.
BUILDING TOMORROW’S TEAM TODAY
We are growing our own talent. We are accomplishing our company’s long-term growth objectives not
only with the support of a solid balance sheet, but also as a result of the hard work of our talented team of
real estate professionals. Last year, we bid farewell to two of Acadia’s retiring senior officers: Joe Hogan,
our Director of Construction, and Mike Nelsen, who held the position of Chief Financial Officer through
2011, at which time the role was transitioned to Jon Grisham as part of, and in furtherance of, our company’s
succession planning. Joe and Mike were key leaders dating back to Acadia’s early years and were
instrumental in helping us accomplish our company’s goals. Both leave big shoes to fill; however, as a
result of their mentoring and our forward-thinking succession planning, we already have the next generation
of leaders in place. In fact, without pointing to any specific metrics, I can confidently affirm that our current
team is the best in the history of our company. Last year, we promoted Herb Eilberg to Senior Vice President
of Acquisitions, Rebecca Ferguson to Vice President of Human Capital, Doug Miller to Vice President of
Lease Administration, and John Swagerty to Vice President of Development. In doing so, we are continuing
to build a team that is well suited for the opportunities and challenges of today as well as for those of the
decades ahead.
IN CONCLUSION
We are off to a good start. With 15 years of solid performance behind us, we remain well positioned, well
capitalized, and highly motivated. Looking ahead, you can expect our energized team to continue to:
Grow our core portfolio in a disciplined manner and, in doing so, elevate the quality of our real estate in
order to remain relevant to both our shoppers and, in turn, our retailers;
Execute on higher-risk, higher-reward investments through our opportunistic/value-add fund, creating
attractive returns for all of our stakeholders; and
Responsibly support the long-term growth of our company by maintaining a healthy balance sheet.
In closing, Acadia is only in its early innings. We look forward to growing the company together with you,
our shareholders, and greatly appreciate your continued support.
Kenneth F. Bernstein
President & CEO
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2013
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State of incorporation)
23-2715194
(I.R.S. employer identification no.)
1311 Mamaroneck Avenue, Suite 260 White Plains, NY 10605
(Address of principal executive offices)
(914) 288-8100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
NO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities Act.
YES
NO
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES
NO
YES
NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in
Rule 12b-2 of the Act).
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
YES
NO
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last
business day of the registrant’s most recently completed second fiscal quarter was approximately $1,369.2 million, based on a price
of $24.70 per share, the average sales price for the registrant’s common shares of beneficial interest on the New York Stock
Exchange on that date.
The number of shares of the registrant’s common shares of beneficial interest outstanding on February 26, 2014 was 55,903,470.
DOCUMENTS INCORPORATED BY REFERENCE
Part III – Portions of the registrant’s definitive proxy statement relating to its 2014 Annual Meeting of Shareholders presently
scheduled to be held May 14, 2014 to be filed pursuant to Regulation 14A.
Item No.
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
TABLE OF CONTENTS
Form 10-K Report
PART I
PART II
5. Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity
Securities and Performance Graph
6. Selected Financial Data
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures about Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
PART III
10. Directors and Executive Officers and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions and Director Independence
14. Principal Accountant Fees and Services
15. Exhibits and Financial Statement Schedule
PART IV
Page
4
9
18
18
28
28
29
31
33
49
51
51
51
53
54
54
54
54
54
54
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 and as such may involve
known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to
be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations
are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or
"project" or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material
adverse effect on our operations and future prospects include, but are not limited to those set forth under the headings "Item 1A.
Risk Factors" and "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this Form
10-K. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated
by reference herein.
3
ITEM 1. BUSINESS.
GENERAL
PART I
Acadia Realty Trust (the "Trust") was formed on March 4, 1993 as a Maryland real estate investment trust ("REIT"). All references
to "Acadia," "we," "us," "our" and "Company" refer to the Trust and its consolidated subsidiaries. We are a fully integrated REIT
focused on the ownership, acquisition, redevelopment, and management of high-quality retail properties located primarily in high-
barrier-to-entry, supply constrained, densely-populated metropolitan areas in the United States along the East Coast and in Chicago.
We currently own, or have an ownership interest in these properties through our Core Portfolio (as defined in Item 2. of this Form
10-K) and our Funds (as defined in Item 1 of this Form 10-K).
All of our assets are held by, and all of our operations are conducted through, Acadia Realty Limited Partnership (the "Operating
Partnership") and entities in which the Operating Partnership owns an interest. As of December 31, 2013, the Trust controlled
97% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in proportion to
its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily
represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in
exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred OP Units", respectively,
and collectively, "OP Units") and employees who have been awarded restricted Common OP Units ("LTIP Units") as long-term
incentive compensation. Limited partners holding Common OP and LTIP Units are generally entitled to exchange their units on
a one-for-one basis for our common shares of beneficial interest of the Trust ("Common Shares"). This structure is referred to as
an umbrella partnership REIT, or "UPREIT".
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to
shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following
fundamentals to achieve this objective:
• Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-
populated metropolitan areas. Our goal is to create value through accretive redevelopment and re-tenanting activities
within our existing portfolio and grow this platform through the acquisition of high-quality assets that have the long-
term potential to outperform the asset class.
• Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds (as
defined below). We target transactions with high inherent opportunity for the creation of additional value through:
value-add investments in high-quality street retail properties with re-tenanting or repositioning opportunities,
opportunistic acquisitions of well-located real-estate anchored by distressed retailers or by motivated sellers and
opportunistic purchases of debt which may include restructuring or the opportunity to convert the investment
into an equity interest.
These may also include joint ventures with private equity investors for the purpose of making investments in operating
retailers with significant embedded value in their real estate assets.
• Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to
sufficient capital to fund future growth.
Investment Strategy — Generate External Growth through our Dual Platforms; Core Portfolio and Funds
The requirements that acquisitions be accretive on a long-term basis based on our cost of capital, as well as increase the overall
Core Portfolio quality and value, are key strategic considerations to the growth of our Core Portfolio. As such, we constantly
evaluate the blended cost of equity and debt and adjust the amount of acquisition activity to align the level of investment activity
with capital flows.
Given the growing importance of technology and e-commerce, many of our retail tenants are appropriately focused on multi-
channel sales and how to best utilize e-commerce initiatives to drive sales at their stores. In light of these initiatives, we have
4
found retailers are becoming more selective as to the location, size and format of their next-generation stores and are focused on
dense, high-traffic retail corridors, where they can utilize smaller and more productive formats closer to their shopping population.
In addition to retailer multi-channeling initiatives, we also believe that retailers continue to recognize that many of the nation’s
urban markets are under-served from a retail standpoint, and we have capitalized on this situation by investing in redevelopment
projects in dense urban areas where retail tenant demand has effectively surpassed the supply of available sites. Accordingly, our
focus for Core Portfolio and Fund acquisitions is on those properties which we believe will not only remain relevant to our tenants,
but become even more so in the future. In connection with our Core Portfolio acquisition activity, we may also engage in discussions
with public and private entities regarding business combinations.
In addition to our Core Portfolio investments in real estate assets, we have also capitalized on our expertise in the acquisition,
redevelopment, leasing and management of retail real estate by establishing discretionary opportunity funds. Our Fund platform
is an investment vehicle where the Operating Partnership invests, along with outside institutional investors, including, but not
limited to, endowments, foundations, pension funds, and investment management companies, in primarily opportunistic and value-
add retail real estate. To date, we have launched four funds ("Funds"); Acadia Strategic Opportunity Fund, LP ("Fund I"), Acadia
Strategic Opportunity Fund II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund III") and Acadia Strategic
Opportunity Fund IV LLC ("Fund IV"). Due to our level of control, we consolidate these Funds for financial reporting purposes.
Fund I and Fund II also include investments in operating companies through Acadia Mervyn Investors I, LLC ("Mervyns I"),
Acadia Mervyn Investors II, LLC ("Mervyns II") and, in certain instances, directly through Fund II, all on a non-recourse basis.
These investments comprise and are referred to as the Company's Retailer Controlled Property Initiative ("RCP Venture").
The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns I and II and and earns
priority distributions or fees for asset management, property management, construction, redevelopment, leasing and legal services.
Cash flows from the Funds and RCP Venture are distributed pro-rata to their respective partners and members (including the
Operating Partnership) until each receives a certain cumulative return ("Preferred Return"), and the return of all capital contributions.
Thereafter, remaining cash flow is distributed 20% to the Operating Partnership ("Promote") and 80% to the partners or members
(including the Operating Partnership).
See Note 1 in the Notes to Consolidated Financial Statements, which begin on page F-1 of this Form 10-K ("Notes to Consolidated
Financial Statements"), for a detailed discussion of the Funds and RCP Venture.
Capital Strategy — Balance Sheet Focus and Access to Capital
Our primary capital objective is to maintain a strong and flexible balance sheet through conservative financial practices, including
a moderate use of leverage, while ensuring access to sufficient capital to fund future growth. We intend to continue financing
acquisitions and property redevelopment with sources of capital determined by management to be the most appropriate based on,
among other factors, availability in the current capital markets, pricing and other commercial and financial terms. The sources of
capital may include the issuance of public equity, unsecured debt, mortgage and construction loans, and other capital alternatives
including the issuance of OP Units. We manage our interest rate risk primarily through the use of fixed rate debt and, where we
use variable rate debt, through the use of certain derivative instruments, including London Interbank Offered Rate ("LIBOR")
swap agreements and interest rate caps as discussed further in Item 7A. of this Form 10-K.
During 2012, we established an at-the-market (“ATM”) equity issuance program providing us an efficient and low-cost platform
for raising public equity to fund our capital needs. Through this program, we have been able to effectively “match-fund” the
required equity for our Core Portfolio and Fund acquisitions through the issuance of Common Shares over extended periods
employing a price averaging strategy.
During January of 2012, we launched this program to provide for up to $75.0 million of gross proceeds from the sale of our
Common Stock. During August 2012, we renewed the program providing for an additional $125.0 million of gross proceeds and
again during April of 2013, providing for an additional $150.0 million of gross proceeds. For the year ended December 31, 2012,
we issued 6.1 million shares under the ATM program, generating $143.8 million of gross proceeds and $140.8 million of net
proceeds, after related issuance costs. For the year ended December 31, 2013, we issued 3.0 million shares, generating $82.2
million of gross proceeds and $80.7 million of net proceeds.
In addition, we have and intend to continue, from time to time, issuing equity in follow-on offerings separate from our ATM
program. During October 2012, we issued 3.5 million Common Shares in a separate follow-on offering for $86.9 million. Net
proceeds after related issuance costs were $85.9 million.
Net proceeds raised through our ATM program and the above follow-on offering were primarily used for acquisitions, both for
our Core Portfolio and our pro-rata share of Fund acquisitions and for general corporate purposes.
5
During December 2013, we also issued 1.2 million OP Units in connection with the acquisition of a property. See Note 2 in the
Notes to Consolidated Financial Statements, for a detailed discussion of this acquisition.
During January 2013, we closed on a new unsecured revolving credit facility providing for up to $150.0 million, which matures
on January 31, 2016 with an additional one-year extension option. As of February 26, 2014, no proceeds have been drawn on this
facility. There are outstanding letters of credit for an aggregate $12.5 million against this facility. During November 2013, we
modified this credit facility by adding an additional $50.0 million term loan, all of which has been funded. The term loan has the
same terms as the aforementioned revolving credit facility.
Operating Strategy — Experienced Management Team with Proven Track Record
Our senior management team has decades of experience in the real estate industry. We have capitalized on our expertise in the
acquisition, redevelopment, leasing and management of retail real estate by creating value through property redevelopment, re-
tenanting and establishing joint ventures, such as the Funds, in which we earn, in addition to a return on our equity interest,
Promotes, priority distributions and fees.
Operating functions such as leasing, property management, construction, finance and legal (collectively, the "Operating
Departments") are generally provided by our personnel, providing for a vertically integrated operating platform. By incorporating
the Operating Departments in the acquisition process, acquisitions are appropriately priced giving effect to each asset’s specific
risks and returns and transition time is minimized allowing management to immediately execute on its strategic plan for each
asset.
INVESTING ACTIVITIES
Core Portfolio
Our Core Portfolio consists primarily of street retail properties and neighborhood and community shopping centers located in high
barrier-to-entry supply constrained markets. As we typically hold our Core Portfolio properties for long-term investment, we
periodically review the existing portfolio and implement programs to renovate and re-tenant targeted properties to enhance their
market position. This in turn strengthens the competitive position of the leasing program to attract and retain quality tenants,
increasing cash flow, and consequently, property values. From time to time, we also identify certain properties for disposition and
redeploy the capital for acquisitions and for the repositioning of existing centers with greater potential for capital appreciation.
For the year ended December 31, 2013, we continued to execute on our strategy of owning a superior Core Portfolio by acquiring,
through our Operating Partnership, high-quality, street retail assets located in densely populated areas for an aggregate purchase
price of $176.9 million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of these acquisitions.
During January 2014, we closed on an additional $44.0 million acquisition, which was under contract as of December 31, 2013.
As of December 31, 2013, we had an acquisition pipeline of $92.1 million under contract, which is subject to certain closing
conditions and as such, no assurance can be given that the closings will be successfully completed. See Item 2. Properties for a
description of the other properties in our Core Portfolio. Subsequent to December 31, 2013, we have closed on $7.3 million of
this pipeline. See Note 23 in the Notes to Consolidated Financial Statements, for a detailed discussion of this acquisition.
During 2013, we sold the A&P Shopping Center, a 62,741 square foot center, anchored by an A&P supermarket, located in Boonton,
New Jersey, for $18.4 million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of this
disposition.
We also make investments in first mortgages, preferred equity and other notes receivable collateralized by real estate, ("Structured
Finance Program") either directly or through entities having an ownership interest therein. During 2013, we made investments
totaling $45.0 million in this program. See Note 5 in the Notes to Consolidated Financial Statements, for a detailed discussion of
our Structured Finance Program.
6
Funds
Acquisitions
Fund III
During 2013, Fund III acquired title to a property through the conversion of a previously issued note receivable and accrued interest
thereon of an aggregate $20.0 million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of
this acquisition. The acquisition period for Fund III has now expired and there will be no new investments made through Fund
III.
Fund IV
During 2013, Fund IV acquired six properties for an aggregate purchase price of $123.2 million. See Note 2 in the Notes to
Consolidated Financial Statements, for a detailed discussion of these acquisitions.
Dispositions
Fund II
During 2013, Fund II sold two shopping centers and one self-storage facility for an aggregate sales price of $204.3 million. See
Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of these dispositions.
Redevelopment Activities
As part of our Fund strategy, we invest in real estate assets that require significant redevelopment. As of December 31, 2013, the
Funds had seven redevelopment projects, one of which is under construction and six which are in various stages of the redevelopment
process as follows:
(dollars in millions)
Property
Owner
Costs
to date
Anticipated
additional
costs (1)
City Point (2)
Fund II
$ 249.5
$30.5 - $60.5
Status
Construction
commenced
Square
feet upon
completion
Anticipated
completion
date
TBD
TBD
Pre-construction
Pre-construction
675,000
TBD
TBD
34.9 - 43.9
Pre-construction
150,000 - 170,000
3.9 - 5.4
Pre-construction
10,000
36.5 - 46.5
Pre-construction
180,000 - 200,000
3.7 - 4.2
Pre-construction
10,000
2015
TBD
TBD
2016
TBD
2016
2016
Sherman Plaza (2)
723 N. Lincoln Lane
Cortlandt Crossing
3104 M Street NW
Fund II
Fund III
Fund III
Fund III
Broad Hollow Commons
Fund III
210 Bowery
Fund IV
Total
Notes:
TBD – To be determined
35.0
6.7
12.1
3.1
13.5
7.8
$ 327.7
(1) Anticipated additional costs are estimated ranges for completing the projects and include costs for tenant improvements and
leasing commissions.
(2) These projects are being redeveloped by Acadia Urban Development LLC ("Acadia Urban Development"), or subsidiaries
thereof, in connection with Fund II's New York Urban/Infill Redevelopment Initiative. See Item 7. of this Form 10-K for further
information on the Acadia Urban Development joint venture as detailed in "Liquidity and Capital Resources – New York Urban/
Infill Redevelopment Initiative."
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RCP Venture
Through Mervyns I and II, and in certain instances, Fund II, we have opportunistically made investments in surplus or underutilized
properties owned by retailers (the "RCP Venture"). While we are primarily a passive partner in the investments made through the
RCP Venture, historically we have provided our services in reviewing potential acquisitions and operating and redevelopment
assistance in areas where we have both a presence and expertise. To date, we have invested an aggregate $63.2 million in our RCP
Venture on a non-recourse basis. See Note 4 in the Notes to Consolidated Financial Statements, for a detailed discussion of the
RCP Venture.
ENVIRONMENTAL LAWS
For information relating to environmental laws that may have an impact on our business, please see "Item 1A. Risk Factors -
Possible liability relating to environmental matters."
COMPETITION
There are numerous entities that compete with us in seeking properties for acquisition and tenants that will lease space in our
properties. Our competitors include other REITs, financial institutions, insurance companies, pension funds, private companies
and individuals. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy
costs (including base rent and operating expenses) and the design and condition of the improvements.
FINANCIAL INFORMATION ABOUT MARKET SEGMENTS
We have three reportable segments: Core Portfolio, Funds and Structured Financing. Structured Financing consists of our notes
receivable and related interest income. The accounting policies of the segments are the same as those described in the summary
of significant accounting policies set forth in Note 1 in the Notes to Consolidated Financial Statements. We evaluate property
performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments
in our Core Portfolio are typically held long-term. Given the contemplated finite life of our Funds, these investments are typically
held for shorter terms. Priority distributions and fees earned by us as general partner or managing member of the Funds are
eliminated in our Consolidated Financial Statements. See Note 3 in the Notes to Consolidated Financial Statements, for information
regarding, among other things, revenues from external customers, a measure of profit and loss and total assets with respect to each
of our segments. Our profits and losses for both our business and each of our segments are not seasonal.
CORPORATE HEADQUARTERS AND EMPLOYEES
Our executive office is located at 1311 Mamaroneck Avenue, Suite 260, White Plains, New York 10605, and our telephone number
is (914) 288-8100. As of December 31, 2013, we had 120 employees, of which 107 were located at our executive office and 13
were located at regional property management offices. None of our employees are covered by collective bargaining agreements.
Management believes that its relationship with employees is good.
COMPANY WEBSITE
All of our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15
(d) of the Securities Exchange Act of 1934, are available at no cost at our website at www.acadiarealty.com, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. These filings
can also be accessed through the Securities and Exchange Commission’s website at www.sec.gov. Alternatively, we will provide
paper copies of our filings at no cost upon request. If you wish to receive a copy of the Form 10-K, you may contact Robert
Masters, Corporate Secretary, at Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, NY 10605. You may
also call (914) 288-8100 to request a copy of the Form 10-K. Information included or referred to on our website is not incorporated
by reference in or otherwise a part of this Form 10-K.
CODE OF ETHICS AND WHISTLEBLOWER POLICIES
The Board of Trustees adopted a Code of Business Conduct and Ethics applicable to all employees, as well as a "Whistleblower
Policy." Copies of these documents are available in the Investor Information section of our website. We intend to disclose future
amendments to, or waivers from (with respect to our senior executive financial officers), our Code of Ethics in the Investor
Information section of our website within four business days following the date of such amendment or waiver.
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ITEM 1A. RISK FACTORS.
If any of the following risks actually occur, our business, results of operations and financial condition would likely suffer. This
section includes or refers to certain forward-looking statements. Refer to the explanation of the qualifications and limitations on
such forward-looking statements discussed in the beginning of this Form 10-K.
We rely on revenues derived from major tenants.
We derive significant revenues from certain anchor tenants that occupy space in more than one center. We could be adversely
affected in the event of the bankruptcy or insolvency of, or a downturn in the business of, any of our major tenants, or in the event
that any such tenant does not renew its leases as they expire or renews such leases at lower rental rates. Vacated anchor space not
only would reduce rental revenues, but if not re-tenanted with the same tenant, or one with equal consumer attraction, at the same
rental rates could adversely affect the entire shopping center because of the loss of the departed anchor tenant's customer drawing
power. Loss of customer drawing power also can occur through the exercise of the right, that most anchors have, to vacate and
prevent re-tenanting by paying rent for the balance of the lease term ("going dark") as would the departure of a "shadow" anchor
tenant that owns its own property. In addition, in the event that certain major tenants cease to occupy a property, such an action
may result in a significant number of other tenants having the right to terminate their leases, or pay a reduced rent based on a
percentage of the tenant's sales, at the affected property, which could adversely affect the future income from such property ("co-
tenancy"). See "Item 2. Properties-Major Tenants" in this Annual Report on Form 10-K for quantified information with respect
to the percentage of our minimum rents received from major tenants.
We may not be able to renew current leases and the terms of re-letting (including the cost of concessions to tenants) may
be less favorable to us than current lease terms.
Upon the expiration of current leases for space located in our properties, we may not be able to re-let all or a portion of that space,
or the terms of re-letting (including the cost of concessions to tenants) may be less favorable to us than current lease terms. If we
are unable to re-let promptly all or a substantial portion of the space located in our properties or if the rental rates we receive upon
re-letting are significantly lower than current rates, our net income and ability to make expected distributions to our shareholders
will be adversely affected due to the resulting reduction in revenues. There can be no assurance that we will be able to retain
tenants in any of our properties upon the expiration of their leases. See "Item 2. Properties - Lease Expirations" in this Annual
Report on Form 10-K for additional information as to the scheduled lease expirations in our portfolio.
The bankruptcy of, or a downturn in the business of, any of our major tenants or a significant number of our smaller
tenants may adversely affect our cash flows and property values.
The bankruptcy of, or a downturn in the business of, any of our major tenants causing them to reject their leases, or not renew
their leases as they expire, or renew at lower rental rates, may adversely affect our cash flows and property values. Furthermore,
the impact of vacated anchor space and the potential reduction in customer traffic may adversely impact the balance of tenants at
a shopping center.
Historically and from time to time, certain of our tenants experienced financial difficulties and filed for bankruptcy protection
under Chapter 11 of the United States Bankruptcy Code ("Chapter 11 Bankruptcy"). Pursuant to bankruptcy law, tenants have the
right to reject some or all of their leases. In the event the tenant exercises this right, the landlord generally has the right to file a
claim for lost rent equal to the greater of either one year's rent (including tenant expense reimbursements) for remaining terms
greater than one year, or 15% of the rent remaining under the balance of the lease term, but not to exceed three years rent. Actual
amounts to be received in satisfaction of those claims will be subject to the tenant's final bankruptcy plan and the availability of
funds to pay its creditors.
Although currently none of our critical tenants are in bankruptcy, experience shows that there can be no assurance that one or
more of our major tenants will be immune from bankruptcy.
E-commerce can have an impact on our business.
The use of the internet by consumers continues to gain in popularity. The migration toward e-commerce is likely to continue. This
increase in internet sales could result in a downturn in the business of our current tenants in their "brick and mortar" locations and
could affect the way future tenants lease space.
While we devote considerable effort and resources to analyze and respond to tenant trends, preferences and consumer spending
patterns, we cannot predict with certainty what future tenants will want, what future retail spaces will look like and how much
9
revenue will be generated at traditional "bricks and mortar" locations. If we are unable to anticipate and respond promptly to trends
in the market due to the illiquid nature of real estate (See the Risk Factor entitled, "Our ability to change our portfolio is limited
because real estate investments are illiquid" below), our occupancy levels and financial results could suffer.
The current economic environment, while improving, may cause us to lose tenants and may impair our ability to borrow
money to purchase properties, refinance existing debt or finance our current redevelopment projects.
Our operations and performance depend on general economic conditions, including the health of the consumer. The U.S. economy
has historically experienced financial downturns from time to time, including a decline in consumer spending, credit tightening
and high unemployment. Although currently recovering, the U.S. economy is not robust with unemployment still at unacceptable
levels.
The current economic environment has also had, an impact on the global credit markets. While we currently believe we have
adequate sources of liquidity, there can be no assurance that we will be able to obtain mortgage loans to purchase additional
properties, obtain financing to complete current redevelopment projects, or successfully refinance our properties as loans become
due. To the extent that the availability of credit is limited, it would also adversely impact our notes receivable as counterparties
may not be able to obtain the financing required to repay the loans upon maturity.
Political and economic uncertainty could have an adverse effect on us.
We cannot predict how current political and economic uncertainty, including uncertainty related to taxation, will affect our critical
tenants, joint venture partners, lenders, financial institutions and general economic conditions, including the health and confidence
of the consumer and the volatility of the stock market.
Political and economic uncertainty poses a risk to us in that it may cause consumers to postpone discretionary spending in response
to tighter credit, reduced consumer confidence and other macroeconomic factors affecting consumer spending behavior, resulting
in a downturn in the business of our tenants. In the event current political and economic uncertainty results in financial turmoil
affecting the banking system and financial markets or significant financial service institution failures, there could be a new or
incremental tightening in the credit markets, low liquidity, and extreme volatility in fixed income, credit, currency and equity
markets. Each of these could have an adverse effect on our business, financial condition and operating results.
There are risks relating to investments in real estate.
Real property investments are subject to multiple risks. Real estate values are affected by a number of factors, including: changes
in the general economic climate, local conditions (such as an oversupply of space or a reduction in demand for real estate in an
area), the quality and philosophy of management, competition from other available space, the ability of the owner to provide
adequate maintenance and insurance and to control variable operating costs. Shopping centers, in particular, may be affected by
changing perceptions of retailers or shoppers regarding the safety, convenience and attractiveness of the shopping center and by
the overall climate for the retail industry. Real estate values are also affected by such factors as government regulations, interest
rate levels, the availability of financing and potential liability under, and changes in, environmental, zoning, tax and other laws.
A significant portion of our income is derived from rental income from real property. Our income and cash flow would be adversely
affected if we were unable to rent our vacant space to viable tenants on economically favorable terms. In the event of default by
a tenant, we may experience delays in enforcing, as well as incur substantial costs to enforce, our rights as a landlord. In addition,
certain significant expenditures associated with each equity investment (such as mortgage payments, real estate taxes and
maintenance costs) are generally not reduced even though there may be a reduction in income from the investment.
Our ability to change our portfolio is limited because real estate investments are illiquid.
Equity investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to
changed conditions is limited. Our Board of Trustees may establish investment criteria or limitations as it deems appropriate, but
currently does not limit the number of properties in which we may seek to invest or on the concentration of investments in any
one geographic region. We could change our investment, disposition and financing policies without a vote of our shareholders.
We could become highly leveraged, resulting in increased risk of default on our obligations and in an increase in debt
service requirements, which could adversely affect our financial condition and results of operations and our ability to pay
distributions. In addition, the viability of the interest rate hedges we use is subject to the strength of the counterparties.
We have incurred, and expect to continue to incur, indebtedness to support our activities. Neither our Declaration of Trust nor any
policy statement formally adopted by our Board of Trustees limits either the total amount of indebtedness or the specified percentage
10
of indebtedness that we may incur. Accordingly, we could become more highly leveraged, resulting in increased risk of default
on our obligations and in an increase in debt service requirements, which could adversely affect our financial condition and results
of operations and our ability to make distributions.
Interest expense on our variable rate debt as of December 31, 2013 would increase by $2.2 million annually for a 100 basis point
increase in interest rates. We may seek additional variable rate financing if and when pricing and other commercial and financial
terms warrant. As such, we often hedge against the interest rate risk related to such additional variable rate debt, primarily through
interest rate swaps but can use other means.
We enter into interest rate hedging transactions, including interest rate swaps and cap agreements, with counterparties, generally,
the same lenders who made the loan in question. There can be no guarantee that the future financial condition of these counterparties
will enable them to fulfill their obligations under these agreements.
Competition may adversely affect our ability to purchase properties and to attract and retain tenants.
There are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial
resources than we have that compete with us in seeking properties for acquisition and tenants who will lease space in our properties.
Our competitors include other REITs, financial institutions, insurance companies, pension funds, private companies and individuals.
This competition may result in a higher cost for properties than we wish to pay. In addition, retailers at our properties (both in our
Core Portfolio and in the portfolios of the Funds) face increasing competition from outlet malls, discount shopping clubs, internet
commerce, direct mail and telemarketing, which could (i) reduce rents payable to us and (ii) reduce our ability to attract and retain
tenants at our properties leading to increased vacancy rates at our properties.
We could be adversely affected by poor market conditions where our properties are geographically concentrated.
Our performance depends on the economic conditions in markets in which our properties are concentrated. We have significant
exposure to the greater New York and Chicago metropolitan regions, from which we derive 42% and 20% of the annual base rents
within our Core Portfolio, respectively and 39% and 12% of annual base rents within our Funds, respectively. Our operating results
could be adversely affected if market conditions, such as an oversupply of space or a reduction in demand for real estate, in these
areas occur.
We have pursued, and may in the future continue to pursue extensive growth opportunities, which may result in significant
demands on our operational, administrative and financial resources.
We are pursuing extensive growth opportunities. This expansion places significant demands on our operational, administrative
and financial resources. The continued growth of our real estate portfolio can be expected to continue to place a significant strain
on our resources. Our future performance will depend in part on our ability to successfully attract and retain qualified management
personnel to manage the growth and operations of our business. In addition, the acquired properties may fail to operate at expected
levels due to the numerous factors that may affect the value of real estate. There can be no assurance that we will have sufficient
resources to identify and manage the properties.
Our inability to carry out our growth strategy could adversely affect our financial condition and results of operations.
Our earnings growth strategy is based on the acquisition and redevelopment of additional properties, including acquisitions of
core properties through our Operating Partnership and our high return investment programs through Fund IV. The consummation
of any future acquisitions will be subject to satisfactory completion of our extensive valuation analysis and due diligence review
and to the negotiation of definitive documentation. We cannot be sure that we will be able to implement our strategy because we
may have difficulty finding new properties, obtaining necessary entitlements, negotiating with new or existing tenants or securing
acceptable financing.
Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including
operating and leasing expectations. In the context of our business plan, "redevelopment" generally means an expansion or renovation
of an existing property. Redevelopment is subject to numerous risks, including risks of construction delays, cost overruns or
uncontrollable events that may increase project costs, new project commencement risks such as the receipt of zoning, occupancy
and other required governmental approvals and permits, and incurring redevelopment costs in connection with projects that are
not pursued to completion.
A component of our growth strategy is through private-equity type investments made through our RCP Venture. These include
investments in operating retailers. The inability of the retailers to operate profitably would have an adverse impact on income
11
realized from these investments. Through our investments in joint ventures we have also invested in operating businesses that
have operational risk in addition to the risks associated with real estate investments, including among other risks, human capital
issues, adequate supply of product and material, and merchandising issues.
We operate through a partnership structure, which could have an adverse effect on our ability to manage our assets.
Our primary property-owning vehicle is the Operating Partnership, of which we are the general partner. Our acquisition of properties
through the Operating Partnership in exchange for interests in the Operating Partnership may permit certain tax deferral advantages
to limited partners who contribute properties to the Operating Partnership. Since properties contributed to the Operating Partnership
may have unrealized gains attributable to the differences between the fair market value and adjusted tax basis in such properties
prior to contribution, the sale of such properties could cause adverse tax consequences to the limited partners who contributed
such properties. Although we, as the general partner of the Operating Partnership, generally have no obligation to consider the tax
consequences of our actions to any limited partner, we own several properties subject to material restrictions designed to minimize
the adverse tax consequences to the limited partners who contributed such properties. Such restrictions may result in significantly
reduced flexibility to manage some of our assets.
Exclusivity obligation to our Funds.
Under the terms of Fund IV, our primary goal is to seek investments for Fund IV, subject to certain exceptions. We may only pursue
opportunities to acquire retail properties directly through the Operating Partnership if (i) the ownership of the acquisition opportunity
by Fund IV would create a material conflict of interest for us; (ii) we require the acquisition opportunity for a "like-kind" exchange;
(iii) the consideration payable for the acquisition opportunity is our Common Shares, OP Units or other securities or (iv) the
investment is outside the parameters of our investment goals for Fund IV (which, in general, seeks more opportunistic level returns).
As a result, we may not be able to make attractive acquisitions directly and instead may only receive a minority interest in such
acquisitions through Fund IV.
Risks of joint ventures.
Partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the
possibility that our partner or co-venturer might become bankrupt, and that our partner or co-venturer may take action contrary
to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT.
Other risks of joint venture investments include impasse on decisions, such as a sale, because neither we nor a joint venture partner
would have full control over the joint venture. Also, there is no limitation under our organizational documents as to the amount
of our funds that may be invested in joint ventures.
Additionally, our partners or co-venturers may engage in malfeasance in spite of our efforts to perform a high level of due diligence
on them. Such acts may or may not be covered by insurance. Finally, partners and co-venturers may engage in illegal activities
which may jeopardize an investment and/or subject us to reputational risk.
Any disputes that may arise between joint venture partners and us may result in litigation or arbitration that would increase our
expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by
or disputes with joint venture partners might result in subjecting properties owned by the joint venture to additional risk. In addition,
we may in certain circumstances be liable for the actions of our third-party joint venture partners.
During 2013, 2012 and 2011, our Fund I and Mervyns I joint ventures provided Promote income. There can be no assurance that
the joint ventures will continue to operate profitably and thus provide additional Promote income in the future. These factors could
limit the return that we receive from such investments or cause our cash flows to be lower than our estimates. In addition, a partner
or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture.
Our structured financing portfolio is subject to specific risks relating to the structure and terms of the instruments and
the underlying collateral.
We invest in notes receivables and preferred equity investments that are collateralized by the underlying real estate, a direct interest
or the borrower’s ownership interest in the entities that own the properties and/or by the borrower’s personal guarantee. The
underlying assets are sometimes subordinate in payment and collateral to more senior loans. The ability of a borrower or entity
to make payments on these investments may be subject to the senior lender and/or the performance of the underlying real estate.
In the event of a default by the borrower or entity on its senior loan, our investment will only be satisfied after the senior loan and
we may not be able to recover the full value of the investment. In the event of a bankruptcy of an entity in which we have a
12
preferred equity interest, or in which the borrower has pledged its interest, the assets of the entity may not be sufficient to satisfy
our investment.
Market factors could have an adverse effect on our share price and our ability to access the public equity markets.
One of the factors that may influence the trading price of our Common Shares is the annual dividend rate on our Common Shares
as a percentage of its market price. An increase in market interest rates may lead purchasers of our Common Shares to seek a
higher annual dividend rate, which could adversely affect the market price of our Common Shares. A decline in our share price,
as a result of this or other market factors, could unfavorably impact our ability to raise additional equity in the public markets.
The loss of a key executive officer could have an adverse effect on us.
Our success depends on the contribution of key management members. The loss of the services of Kenneth F. Bernstein, President
and Chief Executive Officer, or other key executive-level employees could have a material adverse effect on our results of operations.
We have obtained key-man life insurance for Mr. Bernstein. In addition, we have entered into an employment agreement with Mr.
Bernstein; however, it can be terminated by Mr. Bernstein in his discretion. We have not entered into employment agreements
with other key executive-level employees.
Our Board of Trustees may change our investment policy without shareholder approval.
Our Board of Trustees may determine to change our investment and financing policies, our growth strategy and our debt,
capitalization, distribution, acquisition, disposition and operating policies. Our Board of Trustees may establish investment criteria
or limitations as it deems appropriate, but currently does not limit the number of properties in which we may seek to invest or on
the concentration of investments in any one geographic region. Although our Board of Trustees has no present intention to revise
or amend our strategies and policies, it may do so at any time without a vote by our shareholders. Accordingly, the results of
decisions made by our Board of Trustees and implemented by management may or may not serve the interests of all of our
shareholders and could adversely affect our financial condition or results of operations, including our ability to distribute cash to
shareholders or qualify as a REIT.
Distribution requirements imposed by law limit our operating flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to distribute to our shareholders at
least 90% of our taxable income for each calendar year. Our taxable income is determined without regard to any deduction for
dividends paid and by excluding net capital gains. To the extent that we satisfy the distribution requirement, but distribute less
than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we
will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of (i)
85% of our ordinary income for that year; (ii) 95% of our capital gain net income for that year and; (iii) 100% of our undistributed
taxable income from prior years. We intend to continue to make distributions to our shareholders to comply with the distribution
requirements of the Internal Revenue Code and to minimize exposure to federal income and nondeductible excise taxes. Differences
in timing between the receipt of income and the payment of expenses in determining our income as well as required debt amortization
payments and the capitalization of certain expenses could require us to borrow funds on a short-term basis to meet the distribution
requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. The distribution requirements
also severely limit our ability to retain earnings to acquire and improve properties or retire outstanding debt.
There can be no assurance we have qualified or will remain qualified as a REIT for federal income tax purposes.
We believe that we have consistently met the requirements for qualification as a REIT for federal income tax purposes beginning
with our taxable year ended December 31, 1993, and we intend to continue to meet these requirements in the future. However,
qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code, for
which there are only limited judicial or administrative interpretations. No assurance can be given that we have qualified or will
remain qualified as a REIT. The Internal Revenue Code provisions and income tax regulations applicable to REITs differ
significantly from those applicable to other corporations. The determination of various factual matters and circumstances not
entirely within our control can potentially affect our ability to continue to qualify as a REIT. In addition, no assurance can be given
that future legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements
for qualification as a REIT or adversely affect the federal income tax consequences of such qualification. Under current law, if
we fail to qualify as a REIT, we would not be allowed a deduction for dividends paid to shareholders in computing our net taxable
income. In addition, our income would be subject to tax at the regular corporate rates. We also could be disqualified from treatment
as a REIT for the four taxable years following the year during which qualification was lost. Cash available for distribution to our
shareholders would be significantly reduced for each year in which we do not qualify as a REIT. In that event, we would not be
13
required to continue to make distributions. Although we currently intend to continue to qualify as a REIT, it is possible that future
economic, market, legal, tax or other considerations may cause us, without the consent of our shareholders, to revoke the REIT
election or to otherwise take action that would result in disqualification.
Limits on ownership of our capital shares.
For us to qualify as a REIT for federal income tax purposes, among other requirements, not more than 50% of the value of our
capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include
certain entities) at any time during the last half of each taxable year after 1993, and such capital shares must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable
year (in each case, other than the first such year). Our Declaration of Trust includes certain restrictions regarding transfers of our
capital shares and ownership limits that are intended to assist us in satisfying these limitations, among other purposes. These
restrictions and limits may not be adequate in all cases, however, to prevent the transfer of our capital shares in violation of the
ownership limitations. The ownership limit discussed above may have the effect of delaying, deferring or preventing someone
from taking control of us.
Actual or constructive ownership of our capital shares in excess of the share ownership limits contained in our Declaration of
Trust would cause the violative transfer or ownership to be null and void from the beginning and subject to purchase by us at a
price equal to the fair market value of such shares (determined in accordance with the rules set forth in our Declaration of Trust).
As a result, if a violative transfer were made, the recipient of the shares would not acquire any economic or voting rights attributable
to the transferred shares. Additionally, the constructive ownership rules for these limits are complex and groups of related individuals
or entities may be deemed a single owner and consequently in violation of the share ownership limits.
Concentration of ownership by certain investors.
As of December 31, 2013, five institutional shareholders own 5% or more individually, and 47.4% in the aggregate, of our Common
Shares. A significant concentration of ownership may allow an investor or a group of investors to exert a greater influence over
our management and affairs and may have the effect of delaying, deferring or preventing a change in control of us.
Restrictions on a potential change of control.
Our Board of Trustees is authorized by our Declaration of Trust to establish and issue one or more series of preferred shares without
shareholder approval. We have not established any series of preferred shares. However, the establishment and issuance of a series
of preferred shares could make more difficult a change of control of us that could be in the best interests of the shareholders.
In addition, we have entered into an employment agreement with our Chief Executive Officer and severance agreements are in
place with our executives which provide that, upon the occurrence of a change in control of us and either the termination of their
employment without cause (as defined) or their resignation for good reason (as defined), those executive officers would be entitled
to certain termination or severance payments made by us (which may include a lump sum payment equal to defined percentages
of annual salary and prior years' average bonuses, paid in accordance with the terms and conditions of the respective agreement),
which could deter a change of control of us that could be in the best interests of the shareholders.
Certain provisions of Maryland law may limit the ability of a third party to acquire control of our Company.
Under the Maryland General Corporation Law, as amended, which we refer to as the "MGCL," as applicable to REITs, certain
"business combinations," including certain mergers, consolidations, share exchanges and asset transfers and certain issuances and
reclassifications of equity securities, between a Maryland REIT and any person who beneficially owns 10% or more of the voting
power of the trust's outstanding voting shares or an affiliate or an associate, as defined in the MGCL, of the trust who, at any time
within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power
of the then-outstanding shares of beneficial interest of the trust, which we refer to as an "interested shareholder," or an affiliate of
the interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an
interested shareholder. After that five-year period, any such business combination must be recommended by the board of trustees
of the trust and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding voting
shares of beneficial interest of the trust and (2) two-thirds of the votes entitled to be cast by holders of voting shares of the trust
other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination is to be effected
or held by an affiliate or associate of the interested shareholder, unless, among other conditions, the trust's common shareholders
receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form
as previously paid by the interested shareholder for its common shares.
14
These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of
trustees of the trust before the interested shareholder becomes an interested shareholder, and a person is not an interested shareholder
if the board of trustees approved in advance the transaction by which the person otherwise would have become an interested
shareholder. In approving a transaction, our Board of Trustees may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by the Board.
The MGCL also provides that holders of "control shares" of a Maryland REIT (defined as voting shares that, when aggregated
with all other shares owned by the acquirer or in respect of which the acquirer is entitled to exercise or direct the exercise of voting
power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise one of three increasing ranges of voting
power in electing trustees) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or
control of "control shares") have no voting rights except to the extent approved by the affirmative vote of holders of at least two-
thirds of all the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by officers or by employees who
are also trustees of the trust. Our Bylaws contain a provision exempting from the control share acquisition statute, any and all
acquisitions by any person of shares of beneficial interest of the Trust. Our Bylaws can be amended by our Board of Trustees by
majority vote, and there can be no assurance that this provision will not be amended or eliminated at any time in the future.
Additionally, Title 3, Subtitle 8 of the MGCL permits our Board of Trustees, without shareholder approval and regardless of what
is currently provided in our Declaration of Trust or Bylaws, to elect to be subject to certain provisions relating to corporate
governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our Company that
might involve a premium to the market price of our Common Shares or otherwise be in the best interests of our shareholders. We
are subject to some of these provisions (for example, a two-thirds vote requirement for removing a trustee) by provisions of our
Declaration of Trust and Bylaws unrelated to Subtitle 8.
Becoming subject to, or the potential to become subject to, these provisions of the MGCL could inhibit, delay or prevent a transaction
or a change of control of our Company that might involve a premium price for our shareholders or otherwise be in our or their
best interests. In addition, the provisions of our Declaration of Trust on removal of trustees and the provisions of our Bylaws
regarding advance notice of shareholder nominations of trustees and other business proposals and restricting shareholder action
outside of a shareholders meeting unless such action is taken by unanimous written consent could have a similar effect.
Our rights and shareholders' rights to take action against trustees and officers are limited, which could limit recourse in
the event of actions not in the best interests of shareholders.
As permitted by Maryland law, our Declaration of Trust eliminates the liability of our trustees and officers to the Company and
its shareholders for money damages, except for liability resulting from:
•
•
actual receipt of an improper benefit or profit in money, property or services; or
a final judgment based upon a finding of active and deliberate dishonesty by the trustee or officer that was material to
the cause of action adjudicated.
In addition, our Declaration of Trust authorizes, and our Bylaws obligate, us to indemnify each present or former trustee or officer,
to the maximum extent permitted by Maryland law, who is made a party to any proceeding because of his or her service to our
Company. As part of these indemnification obligations, we may be obligated to fund the defense costs incurred by our trustees
and officers.
Legislative or regulatory tax changes could have an adverse effect on us.
There are a number of issues associated with an investment in a REIT that are related to the federal income tax laws, including,
but not limited to, the consequences of our failing to continue to qualify as a REIT. At any time, the federal income tax laws
governing REITs or the administrative interpretations of those laws may be amended or modified. Any new laws or interpretations
may take effect retroactively and could adversely affect us or our shareholders. Reduced tax rates applicable to certain corporate
dividends paid to most domestic noncorporate shareholders are not generally available to REIT shareholders since a REITs income
generally is not subject to corporate level tax. As a result, investment in non-REIT corporations may be viewed as relatively more
attractive than investment in REITs by domestic noncorporate investors. This could adversely affect the market price of our shares.
Our redevelopment and construction activities could affect our operating results.
We intend to continue the selective redevelopment and construction of retail properties, with our project at City Point currently
being our largest redevelopment project (see "Item 1. BUSINESS - INVESTING ACTIVITIES - Funds - Redevelopment Activities"
for a description of the CityPoint project).
15
As opportunities arise, we expect to delay construction until sufficient pre-leasing is reached and financing is in place. Our
redevelopment and construction activities include risks that:
• We may abandon redevelopment opportunities after expending resources to determine feasibility;
• Construction costs of a project may exceed our original estimates;
• Occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;
•
• We may not complete construction and lease-up on schedule, resulting in increased debt service expense and
Financing for redevelopment of a property may not be available to us on favorable terms;
construction costs; and
• We may not be able to obtain, or may experience delays in obtaining necessary zoning, land use, building, occupancy
and other required governmental permits and authorizations.
Additionally, the time frame required for redevelopment, construction and lease-up of these properties means that we may not
realize a significant cash return for several years. If any of the above events occur, the redevelopment of properties may hinder
our growth and have an adverse effect on our results of operations and cash flows. In addition, new redevelopment activities,
regardless of whether or not they are ultimately successful, typically require substantial time and attention from management.
Redevelopments and acquisitions may fail to perform as expected.
Our investment strategy includes the redevelopment and acquisition of shopping centers and other retail properties in supply
constrained markets in densely populated areas with high average household incomes and significant barriers to entry. The
redevelopment and acquisition of properties entails risks that include the following, any of which could adversely affect our results
of operations and our ability to meet our obligations:
• The property may fail to achieve the returns we have projected, either temporarily or for extended periods;
• We may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the
properties we identify;
• We may not be able to integrate an acquisition into our existing operations successfully;
•
Properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames
we project, at the time we make the decision to invest, which may result in the properties' failure to achieve the returns
we projected;
• Our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify
necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs or
decrease cash flow from the property; and
• Our investigation of a property or building prior to our acquisition, and any representations we may receive from the
seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the
property or increase our acquisition cost.
Climate change and catastrophic risk from natural perils.
Some of our current properties could be subject to potential natural or other disasters. We may acquire properties that are located
in areas which are subject to natural disasters. Any properties located in coastal regions would therefore be affected by any future
increases in sea levels or in the frequency or severity of hurricanes and tropical storms, whether such increases are caused by
global climate changes or other factors.
Climate change is a long-term change in the statistical distribution of weather patterns over periods of time that range from decades
to millions of years. It may be a change in the average weather conditions or a change in the distribution of weather events with
respect to an average, for example, greater or fewer extreme weather events. Climate change may be limited to a specific region,
or may occur across the whole Earth.
There may be significant physical effects of climate change that have the potential to have a material effect on our business and
operations. These effects can impact our personnel, physical assets, tenants and overall operations.
Physical impacts of climate change may include:
Increased storm intensity and severity of weather (e.g., floods or hurricanes);
•
•
Sea level rise; and
• Extreme temperatures.
16
As a result of these physical impacts from climate-related events, we may be vulnerable to the following:
• Risks of property damage to our shopping centers;
•
•
Indirect financial and operational impacts from disruptions to the operations of major tenants located in our shopping
centers from severe weather, such as hurricanes or floods;
Increased insurance premiums and deductibles, or a decrease in the availability of coverage, for properties in areas subject
to severe weather;
Increased insurance claims and liabilities;
Increases in energy costs impacting operational returns;
•
•
• Changes in the availability or quality of water, or other natural resources on which the tenant's business depends;
• Decreased consumer demand for consumer products or services resulting from physical changes associated with climate
change (e.g., warmer temperatures or decreasing shoreline could reduce demand for residential and commercial properties
previously viewed as desirable);
Incorrect long term valuation of an equity investment due to changing conditions not previously anticipated at the time
of the investment; and
•
• Economic disruptions arising from the above.
Possible liability relating to environmental matters.
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property,
we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our property,
as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). These laws may impose liability without regard to whether, we knew of
or were responsible for, the presence or disposal of those substances. This liability may be imposed on us in connection with the
activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property
damages and our liability therefore could exceed the value of the property and/or our aggregate assets. In addition, the presence
of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or
rent that property or to borrow using that property as collateral, which, in turn, could reduce our revenues and affect our ability
to make distributions.
A property can also be adversely affected either through physical contamination or by virtue of an adverse effect upon value
attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other
properties. Although our tenants are primarily responsible for any environmental damages and claims related to the leased premises,
in the event of the bankruptcy or inability of any of our tenants to satisfy any obligations with respect to the property leased to
that tenant, we may be required to satisfy such obligations. In addition, we may be held directly liable for any such damages or
claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business, and prior to the acquisition of any property from a third party
or as required by our financing sources, we authorize the preparation of Phase I environmental reports and, when necessary, Phase
II environmental reports, with respect to our properties. Based upon these environmental reports and our ongoing review of our
properties, we are currently not aware of any environmental condition with respect to any of our properties that we believe would
be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that the environmental reports
will reveal all environmental conditions at our properties or that the following will not expose us to material liability in the future:
• The discovery of previously unknown environmental conditions;
• Changes in law;
• Activities of tenants; and
• Activities relating to properties in the vicinity of our properties.
Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions
on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the
operations of our tenants, which could adversely affect our financial condition or results of operations.
Uninsured losses or a loss in excess of insured limits could adversely affect our financial condition.
We carry comprehensive general liability, all-risk property, extended coverage, loss of rent insurance, and environmental liability
on our properties, with policy specifications and insured limits customarily carried for similar properties. However, with respect
to those properties where the leases do not provide for abatement of rent under any circumstances, we generally do not maintain
loss of rent insurance. In addition, there are certain types of losses, such as losses resulting from wars, terrorism or acts of God
17
that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a
loss in excess of insured limits occur, we could lose capital invested in a property, as well as the anticipated future revenues from
a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any
loss of these types would adversely affect our financial condition.
Future terrorist attacks or civil unrest could harm the demand for, and the value of, our properties.
Future terrorist attacks or civil unrest, such as the attacks that occurred in New York, Pennsylvania and Washington, D.C. on
September 11, 2001, and other acts of terrorism or war, could harm the demand for, and the value of, our properties. Terrorist
attacks could directly impact the value of our properties through damage, destruction, loss or increased security costs, and the
availability of insurance for such acts may be limited or may be subject to substantial cost increases. To the extent that our tenants
are impacted by future attacks, their ability to continue to honor obligations under their existing leases could be adversely affected.
A decrease in retail demand could make it difficult for us to renew or re-lease our properties at lease rates equal to or above
historical rates. These acts might erode business and consumer confidence and spending, and might result in increased volatility
in national and international financial markets and economies. Any one of these events might decrease demand for real estate,
decrease or delay the occupancy of our properties, and limit our access to capital or increase our cost of raising capital.
Outages, computer viruses and similar events could disrupt our operations.
We rely on information technology networks and systems, some of which are owned and operated by third parties, to process,
transmit and store electronic information. Any of these systems may be susceptible to outages due to fire, floods, power loss,
telecommunications failures, terrorist attacks and similar events. Despite the implementation of network security measures, our
systems and those of third parties on which we rely may also be vulnerable to computer viruses and similar disruptions. If we and
the third parties on whom we rely are unable to prevent such outages and breaches, our operations could be disrupted.
Increased Information Technology ("IT") security threats and more sophisticated computer crime could pose a risk to
our systems, networks and services.
Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems
and networks and the confidentiality, availability and integrity of our data. The open nature of interconnected technologies may
allow for a network or Web outage or a privacy breach that reveals sensitive data or transmission of harmful/malicious code to
business partners and clients resulting in liability claims. While we attempt to mitigate these risks by employing a number of
measures, including a dedicated IT team, employee training and background checks, comprehensive monitoring of our networks
and systems, and maintenance of backup systems and redundancy along with purchasing available insurance coverage, our systems,
networks and services remain potentially vulnerable to advanced threats. Depending on their nature and scope, such threats could
potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and
destruction of data, loss of trade secrets, system downtimes and operational disruptions, which in turn could adversely affect our
reputation, competitiveness and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
SHOPPING CENTER PROPERTIES
The discussion and tables in this Item 2. include properties held through our Core Portfolio and our Funds. We define our Core
Portfolio as those properties either 100% owned by, or partially owned through joint venture interests by, the Operating Partnership,
or subsidiaries thereof, not including those properties owned through our Funds.
As of December 31, 2013, there are 77 operating properties in our Core Portfolio totaling approximately 5.3 million square feet
of gross leasable area ("GLA"). The Core Portfolio properties are located in 12 states and the District of Columbia and primarily
consist of street retail, dense suburban neighborhood and community shopping centers and mixed-use properties with a strong
retail component. Our shopping centers are predominately anchored by supermarkets or value-oriented retail. The properties are
diverse in size, ranging from approximately 2,000 to 876,000 square feet and as of December 31, 2013, were, in total, 94% occupied.
As of December 31, 2013, we owned and operated 28 properties totaling approximately 2.8 million square feet of GLA in our
Funds, excluding seven properties under redevelopment. In addition to shopping centers, the Funds have invested in mixed-use
18
properties, which generally include retail activities. The Fund properties are located in 10 states and the District of Columbia and
as of December 31, 2013, were, in total, 95% occupied.
Within our Core Portfolio and Funds, we had approximately 700 leases as of December 31, 2013. A majority of our rental revenues
were from national retailers and consist of rents received under long-term leases. These leases generally provide for the monthly
payment of fixed minimum rent and the tenants' pro-rata share of the real estate taxes, insurance, utilities and common area
maintenance of the shopping centers. Certain of our leases also provide for the payment of rent based on a percentage of a tenant's
gross sales in excess of a stipulated annual amount, either in addition to, or in place of, minimum rents. Minimum rents, percentage
rents and expense reimbursements accounted for approximately 90% of our total revenues for the year ended December 31, 2013.
Three of our Core Portfolio properties and five of our Fund properties are subject to long-term ground leases in which a third party
owns and has leased the underlying land to us. We pay rent for the use of the land and are responsible for all costs and expenses
associated with the building and improvements at all eight locations.
No individual property contributed in excess of 10% of our total revenues for the years ended December 31, 2013, 2012 or 2011.
See Note 8 in the Notes to Consolidated Financial Statements, for information on the mortgage debt pertaining to our properties.
The following sets forth more specific information with respect to each of our shopping centers at December 31, 2013:
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Core Portfolio
STREET RETAIL
Chicago Metro
664 N. Michigan
Chicago
2013 (A)
Fee
18,141
100%
4,209,889
Rush and Walton Streets
(4)
Chicago
2011/12
Fee
34,694
100%
4,224,798
613-623 West Diversey
Chicago
651-671 West Diversey
Chicago
2006
2011
Fee
Fee
19,265
46,259
100%
876,977
100%
1,896,925
Chicago
2011/12
Fee
24,420
100%
1,122,103
Clark Street and W.
Diversey (5)
Halsted and Armitage
(6)
232.06 Tommy Bahama
2029/2039
Ann Taylor Loft
2028/2033
121.77 Lululemon
2019/2029
Brioni 2023/2033
BHLDN
2023/2033
45.52 Vitamin Shoppe
2014/2024
41.01 Trader Joe's
2021/2041
Urban Outfitters
2021/2031
45.95 Ann Taylor
2021/2031
Akira 2018/2028
Hanig Shoes
2023/2038
Chicago
2011/12
Fee
44,658
90%
1,750,306
43.55
Intermix
2017/2022
BCBG
2018/2028
Club Monaco
2016/2021
North Lincoln Park (7)
Chicago
2011/12
Fee
35,255
95%
1,077,976
32.22 Aldo 2019/2024
Carhartt
2021/2031
Chase Bank
2014/2029
Total Chicago Metro
New York Metro
222,692
97%
15,158,974
70.04
83 Spring Street
Manhattan
2012 (A)
Mercer Street
Manhattan
2011 (A)
East 17th Street
West 54th Street
Manhattan
Manhattan
2008 (A)
2007 (A)
Fee
Fee
Fee
Fee
3,000
3,375
10,382
5,773
100%
623,884
207.96
100%
394,655
116.93
100%
92%
625,000
60.20
2,195,570
411.60
Paper Source
2022/2027
3 x 1 Denim
2021/—
Stage Coach
Tavern 2033/—
19
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
181 Main Street
Westport
2012 (A)
4401 White Plains Road
Bronx
2011 (A)
Bartow Avenue
Bronx
2005 (C)
Fee
Fee
Fee
11,350
12,964
14,676
100%
845,300
100%
625,000
100%
459,779
239 Greenwich Avenue
Greenwich
1998 (A)
Fee/JV
16,834 (8)
100%
1,554,663
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
74.48 TD Bank
2026/2041
48.21 Walgreens
2060/—
31.33
Sleepy's
2014/2019
92.35 Restoration
Hardware
2014/2024
Third Avenue
Bronx
2006 (A)
868 Broadway
Manhattan
2013 (A)
313-315 Bowery
120 West Broadway
Manhattan
Manhattan
2013 (A)
2013 (A)
Fee
Fee
Fee
Fee
40,320
2,031
6,600
13,938
100%
875,456
100%
662,202
21.71
Planet Fitness
2027/2042
326.05 Dr Martens
2022/2027
100%
100%
435,600
66.00
1,792,284
128.59 HSBC Bank
Total New York Metro
District of Colombia
Metro
1739-53 & 1801-03
Connecticut Avenue
Washington
D.C.
Rhode Island Place
Shopping Center
Georgetown Portfolio
(9)
Washington
D.C.
Washington
D.C.
Total District of
Colombia Metro
Boston Metro
141,243
100%
11,089,393
78.76
2021/2031
Citibank
2022/2037
2012 (A)
Fee
22,907
100%
1,273,085
55.58 Ruth Chris
Steakhouse
2020/—
TD Bank
2024/2044
2012 (A)
Fee
57,529
100%
1,639,679
28.50
TJ Maxx 2017/—
2011 (A)
Fee/JV
32,324
93%
2,359,131
78.11 Lacoste
112,760
99%
5,271,895
47.39
2015/2025
Juicy Couture
2018/2028
Coach 2017/—
330-340 River Street
Cambridge
2012 (A)
Fee
54,226
100%
1,130,470
20.85 Whole Foods
Total Boston Metro
TOTAL STREET
RETAIL
SUBURBAN
PROPERTIES
New Jersey
Elmwood Park
Shopping Center
Elmwood
Park
1998 (A)
Marketplace of Absecon Absecon
1998 (A)
54,226
530,921
100%
1,130,470
99%
32,650,732
20.85
62.47
2021/2051
Fee
Fee
149,070
100%
3,745,668
25.13 A&P 2017/2052
Walgreen’s
2022/2062
104,556
95%
1,419,610
14.33 Rite Aid
60 Orange Street
Bloomfield
2012 (A)
Fee/JV
101,715
100%
695,000
2020/2040
Dollar Tree
2015/2029
6.83 Home Depot
2032/2052
New York
Village Commons
Shopping Center
Smithtown
1998 (A)
Fee
87,330
100%
2,703,356
30.96
Branch Shopping Center
Smithtown
1998 (A)
LI (3)
126,273
77%
2,464,667
25.24 CVS 2020/—
Amboy Road
Staten Island
2005 (A)
LI (3)
63,290
100%
1,943,124
30.70
Pacesetter Park
Shopping Center
Ramapo
1999 (A)
Fee
97,604
88%
1,060,895
12.33
LA Fitness
2027/2042
Stop & Shop
2028/2043
Stop & Shop
2020/2040
20
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
West Shore Expressway
Staten Island
2007 (A)
Fee
55,000
100%
1,391,500
Crossroads Shopping
Center
White Plains
1998 (A)
Fee/JV (10)
310,699
80%
5,377,475
New Loudon Center
Latham
1993 (A)
Fee
255,673
100%
1,959,124
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
25.30 LA Fitness
2022/2037
21.52 Kmart 2017/2032
Modell’s
2014/2019
Home Goods
2018/2033
Party City
2024/2034
7.66
Price Chopper
2015/2035
Marshall’s
2014/2029
Raymour and
Flanigan
2019/2034
AC Moore
2014/2024
Hobby Lobby
2021/—
17.12 Kohl's 2020/2050
28 Jericho Turnpike
Westbury
2012 (A)
Connecticut
Town Line Plaza
Rocky Hill
1998 (A)
Fee
Fee
96,363
100%
1,650,000
206,346
98%
1,647,277
15.80
Stop & Shop
2024/2064
Wal-Mart(11)
Massachusetts
Methuen Shopping
Center
Methuen
1998 (A)
Fee
130,021
100%
1,027,936
7.91 Market Basket
2015/—
Wal-Mart
2016/2051
Crescent Plaza
Brockton
1993 (A)
Fee
218,137
96%
1,803,083
8.61
Vermont
The Gateway Shopping
Center
South
Burlington
Illinois
1999 (A)
Fee
101,655
100%
2,011,840
19.79
Supervalu
2014/2044
Home Depot
2021/2056
Supervalu
2024/2053
Hobson West Plaza
Naperville
1998 (A)
Fee
99,137
94%
1,102,208
11.78 Garden Fresh
Markets
2017/2037
Indiana
Merrillville Plaza
Hobart
1998 (A)
Fee
236,188
81%
2,762,677
14.48 TJ Maxx
2019/2029
Art Van
2023/2038
Michigan
Bloomfield Town
Square
Bloomfield
Hills
1998 (A)
Fee
236,676
98%
3,398,233
14.67 TJ Maxx
2019/2029
Home Goods
2016/2026
Best Buy
2021/2041
Dick's Sporting
Goods
2023/2043
Ohio
Mad River Station (12)
Dayton
1999 (A)
Fee
126,129
83%
1,310,383
12.50 Babies ‘R’ Us
2015/2020
Office Depot
2015/—
21
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Delaware
Brandywine Town
Center
Market Square Shopping
Center
Route 202 Shopping
Center
Pennsylvania
Mark Plaza
Plaza 422
Wilmington
2003 (A)
Fee/JV (13)
876,104
92%
12,889,222
15.99 Bed, Bath &
Beyond
2014/2029
Dick’s Sporting
Goods
2018/2033
Lowe’s Home
Centers
2018/2048
Target 2018/2058
HH Gregg
2020/2035
Wilmington
2003 (A)
Fee/JV (13)
102,047
100%
2,644,439
25.91 TJ Maxx
2016/2021
Trader Joe’s
2019/2034
Wilmington
2006 (C)
LI/JV (3)
(13)
19,984
100%
867,517
43.41
Edwardsville
Lebanon
1993 (C)
1993 (C)
LI/Fee (3)
Fee
106,856
156,279
100%
100%
240,664
835,956
Route 6 Plaza
Honesdale
1994 (C)
Chestnut Hill (14)
Philadelphia
Abington Towne Center
Abington
2006 (A)
1998 (A)
Fee
Fee
Fee
175,589
96%
1,199,706
37,646
216,278
100%
100%
696,461
18.50
1,157,028
19.72 TJ Maxx
Rhode Island
Walnut Hill Plaza
Woonsocket
1998 (A)
Fee
284,717
90%
2,136,086
8.38
2016/2021
Target (15)
Supervalu
2018/2028
Sears 2018/2033
Savers 2018/—
Ocean State Job
Lot 2014/—
Woonsocket
Bowling 2021/—
2.25 Kmart 2014/2049
5.35 Home Depot
2028/2058
Dunham’s
2016/2031
7.09 Kmart 2020/2070
Dollar Tree
2018/2033
4,777,362
94%
62,141,135
14.72
5,308,283
94%
94,791,867
18.97
2003 (A)
LI/JV (3)
97,500
69%
302,076
4.48 Kroger
97,500
69%
302,076
4.48
2014/2049
Safeway
2014/2044
TOTAL SUBURBAN
PROPERTIES
Total Core Portfolio
Fund Portfolio
Fund I Properties
VARIOUS REGIONS
Kroger/Safeway
Portfolio
3 locations
(16)
Total Fund I
Properties
Fund II Properties
New York
Liberty Avenue
216th Street
Queens
Manhattan
2005 (A)
2005 (A)
LI (3)
Fee/JV
26,125
60,000
100%
100%
935,207
2,574,000
35.80 CVS 2032/2052
42.90 City of New York
2027/2032
22
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
161st Street
Manhattan
2005 (A)
Fee/JV
232,252
93%
6,001,724
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
27.69 City of New York
2014/—
Total Fund II
Properties
Fund III Properties
New York
318,377
95%
9,510,931
31.40
Cortlandt Towne Center Mohegan
2009 (A)
Fee
639,834
Lake
93%
9,647,962
16.31 Walmart
2018/2048
A&P 2022/2047
Best Buy
2017/2032
Petsmart
2014/2034
Penguin
2023/2033
Swatch
2023/2028
Petsmart
2024/2039
Shaw’s
2018/2033
Iparty 2015/—
Austin's Liquor
2015/—
654 Broadway
Manhattan
2011 (A)
Fee
640 Broadway
Manhattan
2012 (A)
Fee/JV
New Hyde
Park
Brooklyn
2011 (A)
2013 (A)
Fee
Fee
2,896
4,145
32,661
40,315
100%
550,000
189.92
62%
626,366
244.52
84%
1,146,158
42.03
82%
1,479,477
44.76
Shrewsbury
2010 (A)
Fee/JV (17)
257,775
90%
5,608,210
24.21
New Hyde Park
Shopping Center
Nostrand Ave
Massachusetts
White City Shopping
Center
Maryland
Parkway Crossing
Baltimore
2011 (A)
Fee/JV (18)
260,241
94%
1,973,625
Arundel Plaza
Glen Burnie
2012 (A)
Fee/JV (18)
265,116
97%
1,444,656
8.07 Home Depot
2032/—
Big Lots 2016/—
Shop Rite 2032/
—
5.60 Giant Food
2015/2025
Lowes
2019/2059
Florida
Lincoln Road
Miami
2011 (A)
Fee/JV (19)
59,677
36%
2,744,047
127.17
Sushi Samba
2019/—
Starbucks
2014/2019
Illinois
Heritage Shops
Chicago
2011 (A)
Fee
81,730
96%
3,146,145
40.10 LA Fitness
2025/2040
Ann Taylor
2015/2025
Lincoln Park Centre
Chicago
2012 (A)
Fee
Total Fund III
Properties
Fund IV Properties
New York
62,745
1,707,135
60%
90%
1,747,789
30,114,435
46.61
19.69
1151 Third Avenue
Manhattan
2013 (A)
Fee/JV
12,043
59%
622,263
87.61 Lucky Brand
2014/2019
New Jersey
2819 Kennedy
Boulevard
Paramus Plaza
North Bergen
2013 (A)
Fee/JV (20)
41,477
100%
505,000
12.18
Paramus
2013 (A)
Fee/JV (21)
152,060
65%
1,711,573
17.25 Babies R Us
2019/2044
Ashley Furniture
2024/2034
23
Shopping Center
Location
Year
Constructed
(C)
Acquired
(A)
Ownership
Interest
GLA
Occupancy
%
12/31/13 (1)
Annual
Base
Rent (2)
Annual
Base
Rent
PSF
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Virginia
Promenade at Manassas Manassas
2013 (A)
Fee/JV (20)
265,442
98%
3,321,395
12.75 Home Depot
Lake Montclair
Dumfries
2013 (A)
Fee
105,850
97%
1,909,698
18.60
2031/2071
HH Gregg
2020/2030
Food Lion
2023/2043
Maryland
1701 Belmont Avenue
Catonsville
2012 (A)
Fee/JV (18)
58,674
100%
936,166
15.96 Best Buy
2017/2032
Illinois
938 W. North Avenue
Chicago
2013 (A)
Fee/JV
35,400
59%
928,510
44.66 Restoration
Hardware
2014/2029
Sephora
2024/2029
Florida
Lincoln Road
Miami
2012 (A)
Fee/JV (19)
54,864
89%
5,835,738
119.09 Aldo 2016/2021
Spris 2018/—
Total Fund IV
Properties
Total Fund Operating
Properties (22)
Notes:
725,810
88%
15,770,343
24.67
2,848,822
95%
55,697,785
21.42
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
Does not include space for which lease term had not yet commenced as of December 31, 2013.
These amounts include, where material, the effective rent, net of concessions, including free rent.
We are a ground lessee under a long-term ground lease.
Includes 5 properties (56 E. Walton, 8-12 E. Walton, 930 Rush Street, 50-54 E Walton and 21 E. Chestnut).
Includes 3 properties (639 West Diversey, 2731 N. Clark and 662 W Diversey).
Includes 9 properties (841 W. Armitage, 853 W. Armitage, 843-45 W Armitage, 2206-08 N Halsted, 2633 N
Halsted, 837 W. Armitage, 823 W. Armitage, 851 W. Armitage and 819 W. Armitage).
Includes 5 properties (2140 N. Clybourn, 2299 N. Clybourn,1520 Milwaukee Avenue,1521 W Belmont
and1240 W. Belmont).
In addition to the 16,834 square feet of retail GLA, this property also has 21 apartments comprising 14,434
square feet.
Includes six properties (1533 Wisconsin Ave., 3025 M St., 3034 M St., 3146 M St, 3259-61 M St., and 2809
M St.). We have a 50% investment in these properties.
We have a 49% investment in this property.
Includes a 97,300 square foot Wal-Mart which is not owned by us.
The GLA for this property excludes 29,857 square feet of office space.
We have a 22% investment in this property.
Property consists of two buildings.
Includes a 157,616 square foot Target Store that is not owned by us.
Three remaining assets including locations in Benton, AR, Tulsa, OK and Indianapolis, IN.
The Fund has an 84% investment in this property.
The Fund has a 90% investment in this property.
The Fund has a 95% investment in this property.
The Fund has a 98% investment in this property.
The Fund has a 50% investment in this property.
In addition to the Fund operating properties, there are seven properties under redevelopment; Sherman
Plaza (Fund II), CityPoint (Fund II) , 723 N. Lincoln Lane (Fund III), Broad Hollow Commons (Fund III),
Cortlandt Crossing (Fund III), 3104 M Street (Fund III) and 210 Bowery (Fund IV).
24
MAJOR TENANTS
No individual retail tenant accounted for more than 3.1% of base rents for the year ended December 31, 2013 or occupied more
than 7.2% of total leased GLA as of December 31, 2013. The following table sets forth certain information for the 20 largest retail
tenants by base rent for leases in place as of December 31, 2013. The amounts below include our pro-rata share of GLA and
annualized base rent for the Operating Partnership’s partial ownership interest in properties, including the Funds (GLA and
Annualized Base Rent in thousands):
Number of
Stores in
Portfolio (1)
Total GLA
Annualized
Base Rent (2)
Percentage of Total
Represented by Retail Tenant
Annualized
Base Rent
Total Portfolio
GLA
3
3
3
5
9
4
4
4
2
6
7
2
2
7
2
2
4
2
2
2
110
$
15
134
355
215
164
40
335
61
18
30
19
13
39
19
120
17
20
60
6
2,551
2,194
2,061
2,039
2,035
1,962
1,553
1,428
1,367
1,251
1,058
1,029
1,014
971
967
919
890
879
860
827
2.2%
0.3%
2.7%
7.2%
4.4%
3.3%
0.8%
6.8%
1.2%
0.4%
0.6%
0.4%
0.3%
0.8%
0.4%
2.4%
0.3%
0.4%
1.2%
0.1%
3.1%
2.7%
2.5%
2.5%
2.5%
2.4%
1.9%
1.7%
1.7%
1.5%
1.3%
1.3%
1.2%
1.2%
1.2%
1.1%
1.1%
1.1%
1.1%
1.0%
75
1,790
$
27,855
36.2%
34.1%
Retail Tenant
LA Fitness
Ann Taylor Loft
Supervalu (Shaw’s)
Home Depot
TJX Companies
Ahold (Stop and Shop)
Walgreens
Kmart
A&P
Citibank
JP Morgan Chase
TD Bank
Restoration Hardware
Sleepy's
Trader Joe's
Walmart
Gap (Banana Republic and Old Navy)
Urban Outfitters
Dicks Sporting Goods
HSBC Bank
Total
Notes:
(1)
(2)
Does not include the following tenants that only operate at one location within the Company's portfolio;
Lululemon, Tommy Bahama, Price Chopper and Kohl's.
Base rents do not include percentage rents, additional rents for property expense reimbursements and
contractual rent escalations.
25
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for retail tenants in place as of December 31, 2013, assuming that none
of the tenants exercise renewal options. (GLA and Annualized Base Rent in thousands):
Core Portfolio:
Leases maturing in
Month to Month
2014 (2)
2015
2016
2017
2018
2019
2020
2021
2022
2023
Thereafter
Total
Fund Portfolio:
Leases maturing in
Month to Month
2014 (2)
2015
2016
2017
2018
2019
2020
2021
2022
2023
Thereafter
Total
Annualized Base Rent (1)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
4
71
40
61
51
66
21
26
25
26
20
30
441
$
$
225
10,222
6,604
8,997
10,721
11,693
3,422
6,569
6,812
6,509
5,168
15,714
92,656
—%
11%
7%
10%
12%
13%
4%
7%
7%
7%
6%
16%
100%
Square Feet
16
541
379
517
492
596
165
400
370
166
212
633
4,487
Percentage
of Total
—%
12%
8%
12%
11%
13%
4%
9%
8%
4%
5%
14%
100%
Annualized Base Rent (1)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
6
37
19
29
21
43
22
9
11
19
18
25
259
$
$
339
9,814
2,284
2,554
4,018
7,331
5,216
972
2,192
4,765
3,663
12,077
55,225
1%
18%
4%
5%
7%
13%
9%
2%
4%
9%
7%
21%
100%
Square Feet
19
383
117
94
178
407
311
57
99
144
129
587
2,525
Percentage
of Total
1%
15%
5%
4%
7%
16%
12%
2%
4%
6%
5%
23%
100%
Notes:
(1)
(2)
Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual
rent escalations.
The 108 leases scheduled to expire during 2014 are for tenants at 41 properties located in 31 markets. No single
market represents a material amount of exposure to the Company as it relates to the rents from these leases. Given
the diversity of these markets, properties and characteristics of the individual spaces, the Company cannot make any
general representations as it relates to the expiring rents and the rates for which these spaces may be re-leased.
26
GEOGRAPHIC CONCENTRATIONS
The following table summarizes our retail properties by region as of December 31, 2013. The amounts below also reflect properties
that we invest in through joint ventures and that are held in our Funds (GLA and Annualized Base Rent in thousands):
GLA
(1) (3)
Occupied %
(2)
Annualized
Base
Rent (2) (3)
Annualized Base
Rent per
Occupied Square
Foot (3)
Percentage of Total
Represented by
Region
GLA
Annualized
Base Rent
1,424
995
223
698
97
914
4,351
190
43
35
191
23
28
510
235
5
240
93% $
88%
97%
89%
98%
96%
92% $
88% $
90%
76%
97%
62%
69%
32,355
8,994
15,159
8,574
4,092
7,774
76,948
3,765
937
1,146
2,006
1,801
86
88% $
9,741
93% $
100%
6,136
182
$
$
$
$
$
24.36
10.31
70.04
13.81
43.18
8.90
19.21
33%
23%
5%
16%
2%
21%
100%
22.53
24.21
42.69
10.84
125.23
4.48
37%
8%
7%
37%
5%
6%
42%
12%
20%
11%
5%
10%
100%
39%
10%
12%
20%
18%
1%
21.58
100%
100%
28.01
37.23
98%
2%
97%
3%
94% $
6,318
$
28.21
100%
100%
Region
Core Portfolio:
Operating Properties:
New York Metro
New England
Chicago Metro
Midwest
Washington D.C Metro
Mid-Atlantic
Total Core Operating Properties
Fund Portfolio:
Operating Properties:
New York Metro
New England
Chicago Metro
Mid-Atlantic
Southeast
Other
Total Fund Operating
Properties
Redevelopment Properties:
New York Metro
Mid-Atlantic
Total Fund Redevelopment
Properties
Notes:
(1)
(2)
(3)
Property GLA includes a total of 255,000 square feet, which is not owned by us. This square footage has been
excluded for calculating annualized base rent per square foot.
The above occupancy and rent amounts do not include space that is currently leased, but for which payment of rent
had not commenced as of December 31, 2013.
The amounts presented reflect the Company's pro-rata shares of properties included within each region.
27
ITEM 3. LEGAL PROCEEDINGS.
We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with any
certainty the amounts involved, management is of the opinion that, when such litigation is resolved, our resulting exposure to loss
contingencies, if any, will not have a significant effect on our consolidated financial position, results of operations, or liquidity.
In addition to the foregoing, we recently settled or are currently involved in the following litigation matters:
During August 2009, we terminated the employment of a former Senior Vice President (the "Former Employee") for engaging in
conduct that fell within the definition of "cause" in his severance agreement with us. Had the Former Employee not been terminated
for "cause," he would have been eligible to receive approximately $0.9 million under the severance agreement. Because we
terminated him for "cause," we did not pay the Former Employee any severance benefits under his agreement. The Former Employee
has brought a lawsuit against us in New York State Supreme Court (the "Court"), alleging breach of the severance agreement.
Depositions have been completed and a trial date has been set. The Court has granted our request to file a motion for summary
judgment. We believe we have meritorious defenses to the suit.
During July 2013, a lawsuit was brought against us relating to the 2011 flood at Mark Plaza by Kmart Corporation in the Luzerne
County Court of Common Pleas, State of Pennsylvania. The lawsuit alleges a breach of contract and negligence relating to landlord
responsibility for damages incurred by the tenant as a result of the flood. The tenant is seeking damages in excess of $9.0 million.
We believe that this lawsuit is without merit.
In connection with Phase 2 of the City Point Project, Albee Development LLC ("Albee"), and a non-affiliated construction manager
have been served with a Summons With Notice by Casino Development Group, Inc. ("Casino"), the former contractor responsible
for the excavation and concrete work at the City Point Project. Albee terminated the contract with Casino for cause prior to
completion of the contract. The plaintiff is seeking approximately $8.5 million. Albee believes that it has meritorious defenses to,
and is prepared to vigorously defend itself against the claims. As the case is in the beginning stage of litigation, the outcome of
these claims cannot be estimated at this time.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
28
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
PART II
(a) Market Information, dividends and record holders of our Common Shares
The following table shows, for the period indicated, the high and low sales price for our Common Shares as reported on the New
York Stock Exchange, and cash dividends declared during the two years ended December 31, 2013 and 2012:
Quarter Ended
2013
March 31, 2013
June 30, 2013
September 30, 2013
December 31, 2013
2012
March 31, 2012
June 30, 2012
September 30, 2012
December 31, 2012
$
$
High
Low
$
$
28.11
29.32
26.78
27.59
22.94
23.51
26.05
25.91
25.04
23.34
22.89
24.10
19.39
21.49
23.00
23.91
Dividend
Per Share
0.2100
$
0.2100
0.2100
0.2300
$
0.1800
0.1800
0.1800
0.1800
At February 26, 2014, there were 323 holders of record of our Common Shares.
We have determined for income tax purposes that 87% of the total dividends distributed to shareholders during 2013 represented
ordinary income and 13% represented capital gains. The dividend for the quarter ended December 31, 2013 was paid on January
15, 2014 and is taxable in 2013. Our cash flow is affected by a number of factors, including the revenues received from rental
properties, our operating expenses, the interest expense on our borrowings, the ability of lessees to meet their obligations to us
and unanticipated capital expenditures. Future dividends paid by us will be at the discretion of the Trustees and will depend on
our actual cash flows, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions
of the Code and such other factors as the Trustees deem relevant. In addition, we have the ability to pay dividends in cash, Common
Shares or a combination thereof, subject to a minimum of 10% in cash.
(b) Issuer purchases of equity securities
We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of
our outstanding Common Shares. The program may be discontinued or extended at any time and there is no assurance that we
will purchase the full amount authorized. There were no Common Shares repurchased by us during the year ended December 31,
2013. Under this program we have repurchased 2.1 million Common Shares, none of which were repurchased after December
2001. As of December 31, 2013, management may repurchase up to approximately $7.5 million of our outstanding Common
Shares under this program.
(c) Securities authorized for issuance under equity compensation plans
During 2012, the Company terminated the 1999 and 2003 Share Incentive Plans (the "1999 and 2003 Plans") and adopted the
Amended and Restated 2006 Share Incentive Plan (the "Amended 2006 Plan"). The Amended 2006 Plan amended and restated
our 2006 Share Incentive Plan and increased the authorization to issue options, Restricted Shares and LTIP Units (collectively
"Awards") available to officers and employees by 1.9 million shares. See Note 15 in the Notes to Consolidated Financial Statements,
for a summary of our Share Incentive Plans. The following table provides information related to the Amended 2006 Plan as of
December 31, 2013:
29
Equity Compensation Plan Information
(a)
(b)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
Weighted - average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available
for future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
113,086
$
—
113,086
$
19.28
—
19.28
1,586,132
—
1,586,132
Remaining Common Shares available under the Amended 2006 Plan is as follows:
Outstanding Common Shares as of December 31, 2013
Outstanding OP Units as of December 31, 2013
Total Outstanding Common Shares and OP Units
Common Shares and OP Units pursuant to the 1999 and 2003 Plans
Common Shares pursuant to the Amended 2006 Plan
Total Common Shares available under equity compensation plans
Less: Issuance of Restricted Shares and LTIP Units Granted
Issuance of Options Granted
Number of Common Shares remaining available
(d) Share Price Performance Graph
55,643,068
1,953,514
57,596,582
5,193,681
2,100,000
7,293,681
(2,932,776)
(2,774,773)
1,586,132
The following graph compares the cumulative total shareholder return for our Common Shares for the period commencing
December 31, 2008 through December 31, 2013 with the cumulative total return on the Russell 2000 Index ("Russell 2000"), the
NAREIT All Equity REIT Index (the "NAREIT") and the SNL Shopping Center REITs (the "SNL") over the same period. Total
return values for the Russell 2000, the NAREIT, the SNL and the Common Shares were calculated based upon cumulative total
return assuming the investment of $100.00 in each of the Russell 2000, the NAREIT, the SNL and our Common Shares on December
31, 2008, and assuming reinvestment of dividends. The shareholder return as set forth in the table below is not necessarily indicative
of future performance. The information in this section is not "soliciting material," is not deemed "filed" with the SEC, and is not
to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, whether made before or after
the date hereof and irrespective of any general incorporation language contained in such filing.
Comparison of 5 Year Cumulative Total Return among Acadia Realty Trust, the Russell 2000, the NAREIT and the SNL:
30
Index
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
SNL REIT Retail Shopping Ctr Index
$
12/31/08
100.00
100.00
100.00
100.00
$
12/31/09
124.94
127.17
127.99
98.72
$
12/31/10
140.57
161.32
163.76
128.15
$
12/31/11
161.08
154.59
177.32
124.48
$
12/31/12
206.75
179.86
212.26
157.17
$
12/31/13
211.70
249.69
218.32
167.92
Period Ended
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, on a historical basis, our selected financial data. This information should be read in conjunction
with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results
of Operations appearing elsewhere in this Form 10-K. Funds from operations ("FFO") amounts for the year ended December 31,
2013 have been adjusted as set forth in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Reconciliation of Net Income to Funds from Operations."
31
(dollars in thousands, except per share amounts)
2013
2012
2011
2010
2009
Years ended December 31,
OPERATING DATA:
Revenues
Operating expenses, excluding depreciation and reserves
Interest expense
Depreciation and amortization
Equity in earnings (losses) of unconsolidated affiliates
Gain (loss) on sale of unconsolidated affiliates
Impairment of investment in unconsolidated affiliates
Impairment of asset
Reserve for notes receivable
Gain from bargain purchase
Gain on involuntary conversion of asset
(Loss) gain on debt extinguishment
Income tax (provision) benefit
Income from continuing operations
Income from discontinued operations
Net income
Loss (income) attributable to noncontrolling interests:
Continuing operations
Discontinued operations
Net (income) loss attributable to noncontrolling interests
Net income attributable to Common Shareholders
Supplemental Information:
Income from continuing operations attributable to Common
Shareholders
Income from discontinued operations attributable to Common
Shareholders
Net income attributable to Common Shareholders
Basic earnings per share:
Income from continuing operations
Income from discontinued operations
Basic earnings per share
Diluted earnings per share:
Income from continuing operations
Income from discontinued operations
Diluted earnings per share
Weighted average number of Common Shares outstanding
basic
diluted
$
168,286
$
114,987
$
97,857
$
100,108
$ 107,569
72,108
39,474
40,299
12,382
—
—
(1,500)
—
—
—
(765)
(19)
26,503
18,137
44,640
7,523
(12,048)
(4,525)
58,939
22,811
27,888
550
3,061
(2,032)
—
(405)
—
2,368
(198)
574
9,267
80,669
89,936
14,352
(64,582)
(50,230)
51,024
23,343
20,975
1,555
—
—
—
—
—
—
1,268
(461)
4,877
48,838
53,715
13,734
(15,894)
(2,160)
47,265
26,146
20,093
12,450
(1,479)
—
—
—
33,805
—
—
(2,869)
48,511
2,156
50,667
52,979
24,667
19,849
(1,334)
(195)
(3,768)
—
(1,734)
—
—
7,057
(1,539)
8,561
4,145
12,706
(20,138)
19,292
(472)
(865)
(20,610)
18,427
$
$
$
$
$
$
$
40,115
$
39,706
$
51,555
$
30,057
$
31,133
34,026
$
23,619
$
18,611
$
28,373
$
27,853
6,089
40,115
0.61
0.11
0.72
0.61
0.11
0.72
$
$
$
$
$
16,087
39,706
0.51
0.34
0.85
0.51
0.34
0.85
$
$
$
$
$
32,944
51,555
0.45
0.80
1.25
0.45
0.80
1.25
$
$
$
$
$
1,684
30,057
0.69
0.04
0.73
0.69
0.04
0.73
$
$
$
$
$
3,280
31,133
0.73
0.08
0.81
0.73
0.08
0.81
54,919
54,982
45,854
46,335
40,697
40,986
40,136
40,406
38,005
38,242
Cash dividends declared per Common Share
$
0.8600
$
0.7200
$
0.7200
$
0.7200
$
0.7500
32
(dollars in thousands, except per share amounts)
2013
2012
2011
2010
2009
BALANCE SHEET DATA:
Years ended December 31,
Real estate before accumulated depreciation
$ 1,819,053
$ 1,287,198
$
897,370
$
753,989
$ 624,585
Total assets
Total mortgage indebtedness
Total convertible notes payable
Total common shareholders’ equity
Noncontrolling interests
Total equity
OTHER:
Funds from Operations (1)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
Note:
2,264,957
1,039,617
380
704,236
417,352
1,908,440
1,653,319
1,524,806
1,382,464
612,251
530,951
930
622,797
447,459
930
384,114
385,195
769,309
578,937
48,712
318,212
269,310
587,522
541,506
47,910
312,185
220,292
532,477
1,121,588
1,070,256
67,139
48,827
42,913
50,440
49,613
65,233
59,001
65,715
44,377
47,462
(87,879)
(136,745)
(153,157)
(60,745)
(123,380)
10,022
79,745
56,662
43,152
83,035
(1) The Company considers funds from operations ("FFO") as defined by the National Association of Real Estate
Investment Trusts ("NAREIT") and net property operating income ("NOI") to be appropriate supplemental disclosures
of operating performance for an equity REIT due to their widespread acceptance and use within the REIT and analyst
communities. FFO and NOI are presented to assist investors in analyzing the performance of the Company. They are
helpful as they exclude various items included in net income that are not indicative of the operating performance,
such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of depreciable
real estate. In addition, NOI excludes interest expense. The Company's method of calculating FFO and NOI may be
different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does
not represent cash generated from operations as defined by generally accepted accounting principles ("GAAP") and
is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an
alternative to net income for the purpose of evaluating the Company's performance or to cash flows as a measure of
liquidity. Consistent with the NAREIT definition, the Company defines FFO as net income (computed in accordance
with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate,
plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
As of December 31, 2013, we operated 112 properties, which we own or have an ownership interest in, within our Core Portfolio
or within our Funds. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture
interests by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds. These 112
properties primarily consist of street retail, dense suburban neighborhood and community shopping centers and mixed-use
properties with a strong retail component. The properties we operate are located primarily in high-barrier-to-entry, densely-
populated metropolitan areas in the United States along the East Coast and in Chicago. There are 77 properties in our Core Portfolio
totaling approximately 5.3 million square feet. Fund I has three remaining properties comprising approximately 0.1 million square
feet. Fund II has five properties, three of which (representing 0.3 million square feet) are currently operating, one is under
construction, and one is in the design phase. Fund III has 16 properties, 12 of which (representing 1.7 million square feet) are
currently operating and four of which are in the design phase. Fund IV has 11 properties, 10 of which (representing 0.7 million
square feet) are operating with one under design. The majority of our operating income is derived from rental revenues from these
112 properties, including recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests in
operating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these
are not traditional investments in operating rental real estate but investments in operating businesses, the Operating Partnership
invests in these through a taxable REIT subsidiary ("TRS").
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to
shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following
fundamentals to achieve this objective:
33
• Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-
populated metropolitan areas and create value through accretive redevelopment and re-tenanting activities coupled with
the acquisition of high-quality assets that have the long-term potential to outperform the asset class as part of our Core
asset recycling and acquisition initiative.
• Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds. We
target transactions with high inherent opportunity for the creation of additional value through:
value-add investments in high-quality urban and/or street retail properties with re-tenanting or repositioning
opportunities,
opportunistic acquisitions of well-located real-estate anchored by distressed retailers or by motivated sellers and
opportunistic purchases of debt which may include restructuring or the opportunity to convert the investment
into an equity interest.
These may also include joint ventures with private equity investors for the purpose of making investments in operating
retailers with significant embedded value in their real estate assets.
• Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to
sufficient capital to fund future growth.
RESULTS OF OPERATIONS
See Note 3 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments.
A discussion of the significant variances and primary factors contributing thereto within the results of operations for the years
ended December 31, 2013, 2012 and 2011 are addressed below:
Comparison of the year ended December 31, 2013 ("2013") to the year ended December 31, 2012 ("2012")
Revenues
(dollars in millions)
Rental income
Interest income
Expense reimbursements
Other
Total revenues
2013
Funds
32.5
—
9.3
4.3
46.1
Core
Portfolio
$
$
90.2
—
19.1
1.1
110.4
$
$
2012
Funds
Core
Portfolio
56.0
—
12.8
1.6
70.4
$
$
28.0
—
7.6
1.0
36.6
Structured
Financings
$
— $
11.8
—
—
11.8
$
$
Structured
Financings
—
$
8.0
—
—
8.0
$
Rental income in the Core Portfolio increased $34.2 million primarily as a result of additional rents of (i) $16.5 million following
the consolidation of our Brandywine investment formerly presented under the equity method ("Consolidation of Brandywine"),
(ii) $11.4 million related to the acquisitions of 1520 Milwaukee Avenue, 330-340 River Street, our Chicago Street Retail Portfolio,
930 Rush Street, 28 Jericho Turnpike, Rhode Island Shopping Center, 83 Spring Street, 60 Orange Street, 181 Main Street,
Connecticut Avenue, and 639 West Diversey ("2012 Core Acquisitions"), (iii) $5.1 million related to 2013 Core Portfolio property
acquisitions as detailed in Note 2 in the Notes to Consolidated Financial Statements ("2013 Core Acquisitions") and (iv) $1.1
million as a result of re-anchoring and leasing activities at Bloomfield Town Square and Branch Plaza ("Core Re-tenanting").
Rental income in the Funds increased $4.5 million primarily as a result of additional rents of (i) $2.9 million related to 2013 Fund
property acquisitions as detailed in Note 2 in the Notes to Consolidated Financial Statements ("2013 Fund Acquisitions") and (ii)
$0.7 million related to the acquisitions of 640 Broadway, Lincoln Park Centre and 3104 M Street ("2012 Fund Acquisitions").
Interest income increased $3.8 million as a result of the origination of two notes during December 2012. This was partially offset
by the repayment of four notes during 2012 and 2013.
Expense reimbursements in the Core Portfolio increased $6.3 primarily million as a result of (i) $2.9 million from the Consolidation
of Brandywine, (ii) $1.5 million from 2012 Core Acquisitions and (iii) $0.6 million from 2013 Core Acquisitions. Expense
reimbursements in the Funds increased $1.7 million as a result of 2013 and 2012 Fund Acquisitions.
34
Other income in the Funds increased $3.3 million primarily as a result of the 2013 collection of a note receivable originated in
2010, which had been written off prior to 2013.
Operating Expenses
(dollars in millions)
Property operating
Other operating
Real estate taxes
General and administrative
Reserve for notes receivable
Depreciation and amortization
Total operating expenses
2013
Funds
Core
Portfolio
$
$
13.5
2.7
12.8
23.6
—
29.0
81.6
$
$
7.5
1.9
8.1
2.0
—
11.3
30.8
Structured
Financings
$
— $
—
—
—
—
—
$
— $
2012
Funds
Core
Portfolio
Structured
Financings
—
$
—
—
—
0.4
—
0.4
7.1
2.1
6.7
1.6
—
10.8
28.3
$
10.3
1.8
9.7
19.6
—
17.1
58.5
$
$
Property operating expenses for the Core Portfolio increased $3.2 million as a result of $2.0 million from (i) the Consolidation of
Brandywine and (ii) $1.2 million from 2013 and 2012 Core Acquisitions.
Real estate tax expense in the Core Portfolio increased $3.1 million as a result of (i) $1.4 million from the Consolidation of
Brandywine and (ii) $1.7 million from 2013 and 2012 Core Acquisitions. Real estate tax expense in the Funds increased $1.4
million as a result of 2013 and 2012 Fund Acquisitions.
General and administrative expense in the Core Portfolio increased $3.8 million primarily due to non-cash executive retirement
expenses as well as additional hiring during 2013.
Depreciation and amortization for the Core Portfolio increased $11.9 million primarily as a result of (i) $4.8 million from 2012
Core Acquisitions, (ii) $3.6 million from the Consolidation of Brandywine and (iii) $2.0 million from 2013 Core Acquisitions.
Other
(dollars in millions)
Equity in (losses) earnings of
unconsolidated affiliates
Gain on sale of unconsolidated
affiliates
Impairment of investment in
unconsolidated affiliate
Impairment of asset
Loss on debt extinguishment
Gain on involuntary conversion of
asset
Interest and other finance expense
Income tax (provision) benefit
Income from discontinued
operations
(Loss) income attributable to
noncontrolling interests:
- Continuing operations
- Discontinued operations
2013
Funds
Core
Portfolio
Structured
Financings
Core
Portfolio
2012
Funds
Structured
Financings
$
(0.1) $
12.5
$
— $
0.2
$
0.3
$
—
—
(1.5)
(0.3)
—
(26.2)
0.1
6.9
(1.0)
(2.4)
—
—
—
(0.5)
—
(13.3)
(0.1)
11.2
8.5
(9.6)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2.4
(15.4)
(0.2)
3.1
(2.0)
—
(0.2)
—
(7.4)
0.8
0.3
80.4
0.1
(0.1)
14.3
(64.5)
—
—
—
—
—
—
—
—
—
—
—
Equity in (losses) earnings of unconsolidated affiliates in the Funds increased $12.2 million primarily as a result of (i) $8.2 million
from the acquisitions of Arundel Plaza, Lincoln Road Portfolio, 1701 Belmont Avenue, 2819 Kennedy Boulevard and Promenade
35
at Manassas ("2012 and 2013 Fund Unconsolidated Acquisitions") and (ii) $4.0 million from our share of earnings from our
investment in the Self-Storage Management company during 2013 ("Self-Storage Management").
Gain on sale of unconsolidated affiliates represents our share of a $3.4 million gain on sale of an unconsolidated Fund investment
during 2012.
Impairment of investment in unconsolidated affiliate represents the settlement of legal proceedings from our Mervyns investment
during 2012.
Impairment of asset in the Core Portfolio represents an impairment charge on Walnut Hill Plaza during 2013. See Note 1 in the
Notes to Consolidated Financial Statements for a discussion of the impairment charge.
Gain on involuntary conversion of asset of $2.4 million related to insurance proceeds received in excess of net basis for flood
damage at Mark Plaza during 2012.
Interest expense in the Core Portfolio increased $10.8 million primarily as a result of the Consolidation of Brandywine. Interest
expense in the Funds increased $5.9 million primarily due to an increase of $9.4 million related to higher average outstanding
borrowings offset by an increase in capitalized interest related to redevelopment activities during 2013.
Income from discontinued operations primarily represents activity related to a property held for sale in 2013 and properties sold
during 2013 and 2012.
(Loss) income attributable to noncontrolling interests - Continuing operations and Discontinued operations represents the
noncontrolling interests' share of all the Funds variances discussed above.
Comparison of the year ended December 31, 2012 ("2012") to the year ended December 31, 2011 ("2011")
Revenues
(dollars in millions)
Rental income
Interest income
Expense reimbursements
Other
Total revenues
2012
Funds
Core
Portfolio
$
$
56.0
—
12.8
1.6
70.4
$
$
28.0
—
7.6
1.0
36.6
$
Structured
Financings
$
2011
Funds
Core
Portfolio
44.9
—
11.1
2.2
58.2
$
$
20.9
—
6.8
0.3
28.0
Structured
Financings
—
$
11.7
—
—
11.7
$
— $
8.0
—
—
8.0
$
Rental income in the Core Portfolio increased $11.1 million primarily as a result of (i) $6.9 million related to 2012 Core Acquisitions,
(ii) $2.5 million from the acquisitions of 651 West Diversey, Chicago Retail Portfolio, 4401 White Plains Road, and Mercer Street
("2011 Core Acquisitions"), and (iii) $1.3 million related to Core Re-tenanting. Rental income in the Funds increased $7.1 million
primarily from (i) $3.0 million related to 2012 Fund Acquisitions, (ii) $2.2 million from the acquisitions of New Hyde Park, 654
Broadway, and Heritage Shops ("2011 Fund Acquisitions"), and (iii) $1.1 million from leases that commenced during 2011 and
2012 at 161st Street ("Fund Redevelopment Property").
Interest income decreased $3.7 million as a result of the full repayment of two notes during 2011. This was partially offset by five
new notes originated during 2012.
Expense reimbursements in the Core Portfolio increased $1.7 million as a result of the 2012 and 2011 Core Acquisitions and an
increase in common area maintenance ("CAM") expenses during 2012.
36
Operating Expenses
(dollars in millions)
Property operating
Other operating
Real estate taxes
General and administrative
Reserve for notes receivable
Depreciation and amortization
Total operating expenses
$
2012
Funds
7.1
2.1
6.7
1.6
—
10.8
28.3
Structured
Financings
Core
Portfolio
2011
Funds
Structured
Financings
$
— $
—
—
—
—
—
$
— $
7.4
0.7
8.4
20.9
—
13.1
50.5
$
$
6.0
0.7
4.8
2.1
—
7.9
$
21.5
$
—
—
—
—
—
—
—
Core
Portfolio
$
10.3
$
1.8
9.7
19.6
0.4
17.1
58.9
$
The increase in property operating expenses was the result of the 2012 and 2011 Core Acquisitions and an $1.2 million increase
in credit loss during 2012. Property operating expenses in the Funds increased $1.1 million from 2012 and 2011 Fund Acquisitions
as well as an increase in credit loss during 2012.
Other operating expenses, which represents acquisition costs, increased for the Core Portfolio and Funds as a result of the 2012
Core Acquisitions and 2012 Fund Acquisitions, respectively.
Real estate tax expense in the Core Portfolio increased $1.4 million as a result of the 2012 and 2011 Core Acquisitions. Real estate
tax expense in the Funds increased $1.8 million as a result of the 2012 and 2011 Fund Acquisitions and the Fund Redevelopment
Property.
The decrease in general and administrative expense in the Core Portfolio was due to an increase in capitalized salaries related to
leasing and redevelopment activities in 2012.
Depreciation and amortization expense in the Core Portfolio increased $4.0 million as a result of the 2012 and 2011 Core
Acquisitions. Depreciation and amortization expense in the Funds increased $2.9 million due to the 2012 and 2011 Fund
Acquisitions and the Fund Redevelopment Property.
Other
(dollars in millions)
Equity in earnings of unconsolidated
affiliates
$
Gain on sale of unconsolidated
affiliates
Impairment of investment in
unconsolidated affiliate
(Loss) gain on debt extinguishment
Gain on involuntary conversion of
asset
Interest and other finance expense
Income tax (provision) benefit
Income from discontinued
operations
(Loss) income attributable to
noncontrolling interests:
- Continuing operations
- Discontinued operations
2012
Funds
Core
Portfolio
Structured
Financings
Core
Portfolio
2011
Funds
Structured
Financings
0.2
$
0.3
$
— $
0.7
$
0.9
$
—
—
—
2.4
(15.4)
(0.2)
3.1
(2.0)
(0.2)
—
(7.4)
0.8
0.3
80.4
0.1
(0.1)
14.3
(64.5)
—
—
—
—
—
—
—
—
—
—
—
1.3
—
(16.5)
(1.1)
—
—
—
—
(6.9)
0.6
29.2
19.6
(0.6)
(0.1)
14.3
(15.8)
—
—
—
—
—
—
—
—
—
—
Gain on sale of unconsolidated affiliates represents our share of a $3.4 million gain on sale of an unconsolidated Fund
investment during 2012.
37
Impairment of investment in unconsolidated affiliate represents the settlement of legal proceedings from our Mervyns
investment during 2012.
Gain on debt extinguishment of $1.3 million in the Core Portfolio during 2011 was the result of the purchase of mortgage debt at
a discount in 2011.
Gain on involuntary conversion of asset of $2.4 million related to insurance proceeds received in excess of net basis for flood
damage at Mark Plaza during 2012.
Interest expense in the Core Portfolio decreased $1.1 million primarily as a result of the Company's purchase of Convertible Notes
in December 2011 (Note 9).
Income from discontinued operations represents activity related to properties sold during 2012 and 2011.
(Loss) income attributable to noncontrolling interests - Continuing operations and Discontinued operations represents the
noncontrolling interests' share of all the Funds variances discussed above.
CORE PORTFOLIO
The following discussion of net property operating income ("NOI") and rent spreads on new and renewal leases includes the
activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds
invest primarily in properties that typically require significant leasing and redevelopment. Given that the Funds are finite-life
investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not
meaningful measures for our Fund investments.
NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our
Core Portfolio to be appropriate supplemental disclosures of portfolio operating performance due to their widespread acceptance
and use within the REIT investor and analyst communities. NOI and rent spreads on new and renewal leases are presented to assist
investors in analyzing our property performance, however, our method of calculating these may be different from methods used
by other REITs and, accordingly, may not be comparable to such other REITs.
Net Property Operating Income
NOI is determined as follows:
38
RECONCILIATION OF CONSOLIDATED OPERATING INCOME TO NET OPERATING INCOME - CORE
PORTFOLIO
(dollars in millions)
Consolidated Operating Income
Add back:
General and administrative
Depreciation and amortization
Less:
Management fee income
Interest income
Straight-line rent and other adjustments
Consolidated NOI
Year Ended
December 31,
2012
2013
$ 55.9
$ 27.8
25.5
40.3
(0.1)
(11.8)
(5.8)
104.0
21.2
27.9
(1.5)
(8.0)
2.8
70.2
Noncontrolling interest in consolidated NOI
Less: Operating Partnership's interest in Fund NOI included above
Add: Operating Partnership's share of unconsolidated joint ventures NOI 1
NOI - Core Portfolio
(33.9)
(5.3)
2.8
(19.4)
(4.2)
6.1
$ 67.6
$ 52.7
Note:
(1) Does not include the Operating Partnership's share of NOI from unconsolidated joint ventures within the Funds
Same-Store NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes
those properties which we acquired, sold or expected to be sold, and redeveloped during these periods. The following table
summarizes Same Store NOI for our Core Portfolio for the years ended December 31, 2013 and 2012:
SAME-STORE NET OPERATING INCOME - CORE PORTFOLIO
(dollars in millions)
Core Portfolio NOI - Continuing Operations
Less properties excluded from Same-Store
NOI
Same-Store NOI
Percent change from 2012
Components of Same-Store NOI
Same-Store Revenues
Same-Store Operating Expenses
Same-Store NOI
Year Ended December 31,
2013
2012
$
$
$
$
67.6
(20.7)
46.9
7.2%
65.5
18.6
46.9
$
$
$
$
52.7
(8.9)
43.8
61.8
18.0
43.8
The 7.2% increase in Same Store NOI was primarily attributable to re-tenanting activities during 2012 as well as occupancy gains
within the Core Portfolio.
39
Rent Spreads on Core Portfolio New and Renewal Leases
The following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on
leases executed within our Core Portfolio for the year ended December 31, 2013. Cash basis represents a comparison of rent
most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a
comparison of rents as adjusted for contractual escalations, abated rent and lease incentives for the same comparable leases.
Core Portfolio New and Renewal Leases
Number of new and renewal leases executed
Gross leasable area
New base rent
Previous base rent
Percent growth in base rent
Average cost per square foot (1)
Weighted average lease term (years)
Note:
Year Ended
December 31, 2013
Cash
Basis
74
339,800
22.34
20.91
6.8%
19.03
6.4
$
$
$
$
$
$
Straight-Line
Basis
74
339,800
23.85
20.17
18.3%
19.03
6.4
(1) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(dollars in thousands)
2013
For the Years Ended December 31,
2011
2012
2010
2009
Net income attributable to Common Shareholders
Depreciation of real estate and amortization of leasing costs:
$ 40,115
$ 39,706
$ 51,555
$ 30,057
$ 31,133
Consolidated affiliates, net of noncontrolling interests’ share
Unconsolidated affiliates
28,752
2,680
23,090
1,581
18,274
1,549
18,445
1,561
18,847
1,604
Income attributable to noncontrolling interests in operating
partnership (1)
Gain on sale of properties (net of noncontrolling interests’ share)
Consolidated affiliates
Unconsolidated affiliates
Impairment of asset
Funds from operations (2)
Funds From Operations per Share - Diluted
Weighted average number of Common Shares and OP Units
Funds from operations, per share
470
510
635
377
464
(6,378)
—
(15,451)
(609)
(31,716)
—
— (2,435)
—
—
1,500
$ 67,139
—
$ 48,827
2,616
$ 42,913
—
$ 50,440
—
$ 49,613
55,954
1.20
$
46,940
1.04
$
41,467
1.04
$
40,876
1.23
$
38,913
1.28
$
40
Notes:
(1) Represents income attributable to Common OP Units and does not include distributions paid to Series A and B
Preferred OP Unitholders.
(2) We consider funds from operations ("FFO") as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") and net property operating income ("NOI") to be an appropriate supplemental disclosure of
operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst
communities. FFO and NOI are presented to assist investors in analyzing our performance. They are helpful as
they exclude various items included in net income that are not indicative of the operating performance, such as
gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of depreciable
real estate. In addition, NOI excludes interest expense. Our method of calculating FFO and NOI may be different
from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not
represent cash generated from operations as defined by generally accepted accounting principles ("GAAP") and
is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an
alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.
Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP),
excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity
Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the
funding of our capital committed to the Funds and property acquisitions and redevelopment/re-tenanting activities within our Core
Portfolio, (iii) distributions to our Fund investors and (iv) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to
our shareholders. For the year ended December 31, 2013, we paid dividends and distributions on our Common Shares and Common
OP Units totaling $45.4 million.
Distributions to noncontrolling interests during 2013 totaled $89.0 million. Of this, $74.9 million related to distributions to investors
within our Funds, of which $37.7 million was primarily funded from proceeds of property sales within Fund II and $31.7 million
was funded with proceeds primarily from refinancing activities within Fund III.
Investments
Fund I and Mervyns I
Fund I and Mervyns I have returned all invested capital and accumulated preferred return thus triggering our Promote in all future
Fund I and Mervyns I earnings and distributions. As of December 31, 2013, $86.6 million has been invested in Fund I and Mervyns
I, of which the Operating Partnership contributed $19.2 million.
As of December 31, 2013, Fund I currently owned, or had ownership interests in three remaining assets comprising approximately
0.1 million square feet.
In addition, we, along with our Fund I investors have invested in Mervyns as discussed in Note 4 to the Consolidated Financial
Statements of this Form 10-K.
Fund II and Mervyns II
To date, Fund II’s primary investment focus has been in investments involving significant redevelopment activities and the RCP
Venture. As of December 31, 2013, $300.0 million has been invested in Fund II and Mervyns II, of which the Operating Partnership
contributed $60.0 million.
During September of 2004, through Fund II, we launched our New York Urban/Infill Redevelopment Initiative. Fund II, together
with an unaffiliated partner, formed Acadia Urban Development LLC ("Acadia Urban Development") for the purpose of acquiring,
constructing, redeveloping, owning, operating, leasing and managing certain retail or mixed-use real estate properties in the New
41
York City metropolitan area. The unaffiliated partner agreed to invest 10% of required capital up to a maximum of $2.2 million
and Fund II, the managing member, agreed to invest the balance to acquire assets in which Acadia Urban Development agreed to
invest. Of the eight properties acquired by Acadia Urban Development, three have been sold. Of the remaining five assets, three
are currently at, or near, stabilization, one is currently under construction and one is in the pre-construction phase as previously
discussed in ""-INVESTING ACTIVITIES- REDEVELOPMENT ACTIVITIES" in Item 1. of this Form 10-K. Redevelopment
costs incurred during 2013 by Acadia Urban Development in connection with the New York Urban/Infill Redevelopment Initiative
totaled $98.6 million. Anticipated additional costs for the property currently under construction are currently estimated to range
between $30.5 and $60.5 million.
RCP Venture
See Note 4 in the Notes to Consolidated Financial Statements, for a table summarizing the RCP Venture investments from inception
through December 31, 2013.
Fund III
During 2007, we formed Fund III with 14 institutional investors, including all of the investors from Fund I and a majority of the
investors from Fund II with $502.5 million of committed discretionary capital. During 2012, the committed capital amount was
reduced to $475.0 million. As of December 31, 2013, $357.5 million has been invested in Fund III, of which the Operating
Partnership contributed $71.1 million. The remaining $117.5 million of unfunded capital will be used to fund current redevelopment
projects.
Fund III has invested in four redevelopment projects as previously discussed in "—INVESTING ACTIVITIES-REDVELOPMENT
ACTIVITIES" in Item 1. of this Form 10-K. Remaining anticipated costs for the three projects currently owned by Fund III that
can be estimated aggregate between $75.3 million and $95.8 million.
In addition to its four redevelopment projects noted above, Fund III also owns, or has ownership interests in, the following 11
assets comprising approximately 1.8 million square feet as follows:
(dollars in millions)
Property
Nostrand Avenue
Arundel Plaza
Lincoln Park Centre
640 Broadway
New Hyde Park
654 Broadway
Parkway Crossing
The Heritage Shops at Millennium Park
Lincoln Road Portfolio
White City Shopping Center
Cortlandt Towne Center
Total
Fund IV
Location
Date Acquired
Brooklyn, NY
February 2013 $
Glen Burnie, MD
Chicago, IL
August 2012
April 2012
New York, NY
February 2012
New Hyde Park, NY
December 2011
New York, NY
Baltimore, MD
Chicago, IL
December 2011
December 2011
April 2011
South Miami Beach, FL
February 2011
Shrewsbury, MA
December 2010
Westchester Co. NY
January 2009
Purchase
Price
GLA
18.5
17.6
31.5
32.5
11.2
13.7
21.6
31.6
51.9
56.0
78.0
40,300
265,100
62,700
39,600
31,500
18,700
260,000
105,000
61,400
225,200
642,000
$
364.1
1,751,500
During 2012, we formed Fund IV with 17 principally institutional investors as well as some high-net worth individuals with $540.6
million of committed discretionary capital. As of December 31, 2013, $95.9 million has been invested in Fund IV, of which the
Operating Partnership contributed $22.2 million. The remaining $444.7 million of unfunded capital will be used to fund future
acquisitions and current redevelopment projects.
Fund IV has invested in one redevelopment project as previously discussed in "—INVESTING ACTIVITIES-REDVELOPMENT
ACTIVITIES" in Item 1. of this Form 10-K. Remaining costs for this project are currently estimated to aggregate between $3.7
million and $4.2 million.
42
In addition to its redevelopment project, Fund IV also owns, or has ownership interests in, the following 10 assets compromising
0.7 million square feet as follows:
(dollars in millions)
Property
Location
Date Acquired
1151 Third Avenue
New York, NY
October 2013
$
Purchase
Price
GLA
2819 Kennedy Boulevard
North Bergen, NJ
June 2013
Paramus Plaza
Promenade at Manassas
Lake Montclair
Paramus, NJ
Manassas, VA
Dumfries, VA
September 2013
July 2013
October 2013
1701 Belmont Avenue
Catonsville, MD
December 2012
938 W. North Avenue
Chicago, IL
November 2013
Lincoln Road Portfolio
South Miami Beach, FL
December 2012
Total
Development Activities
18.0
9.0
18.9
38.0
19.3
4.7
20.0
139.0
266.9
$
12,040
41,480
152,060
265,440
105,850
58,670
35,400
54,860
725,800
During the year ended December 31, 2013, costs associated with redevelopment and leasing activities totaled $111.5 million. Of
this amount, $89.7 million represented costs associated with redevelopment, $14.1 million represented construction costs associated
with re-tenanting and $4.6 million represented direct leasing costs. The balance was comprised of costs associated with other
capital expenditures, including the capitalization of internal compensation and related costs.
Structured Financings
As of December 31, 2013, our structured financing portfolio, net of allowances aggregated $126.7 million, with accrued interest
thereon of $5.2 million. The notes were collateralized by the underlying properties, the borrower’s ownership interest in the entities
that own the properties, and/or by the borrower’s personal guarantee. Effective interest rates on our notes receivable ranged from
5.5% to 24.0% with maturities from January 2014 through November 2020.
Investments made in notes receivable during 2013 are discussed in Note 5 in the Notes to Consolidated Financial Statements.
Other Investments
Acquisitions made during 2013 are discussed in Note 2 in the Notes to Consolidated Financial Statements.
Core Portfolio Property Redevelopment and Re-tenanting
Our Core Portfolio redevelopment and re-anchoring programs focus on selecting well-located street retail locations and dense
suburban shopping centers and creating significant value through re-tenanting and property redevelopment. During 2013, we
initiated the re-anchoring of a former A&P supermarket location in the New York City metropolitan area. Costs associated with
these redevelopments aggregated $4.6 million through December 31, 2013. Costs for the remainder of the space are estimated to
range between $4.0 million and $6.0 million.
Purchase of Convertible Notes
Purchases of the Convertible Notes have been another use of our liquidity. As of December 31, 2013 $114.6 million of the $115.0
million of Convertible Notes originally issued during 2006 have been retired. During 2013, we purchased $0.6 million of our
outstanding Convertible Notes at face value. See Note 9 in the Notes to Consolidated Financial Statements for further discussion
of our Convertible Notes.
43
Share Repurchase
We have an existing share repurchase program as further described in Item 5. of this Form 10-K. Management has not repurchased
any shares under this program since December 2001, although it has the authority to repurchase up to approximately $7.5 million
of our outstanding Common Shares.
SOURCES OF LIQUIDITY
Our primary sources of capital for funding our liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the
issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds
III and IV of $94.1million and $341.8 million, respectively, (iv) future sales of existing properties and (v) cash on hand of $79.2
million as of December 31, 2013 and future cash flow from operating activities.
During 2013, noncontrolling interest capital contributions to Fund III and IV of $13.2 million and $24.0 million, respectively,
were primarily used to fund acquisitions and to pay down existing credit facilities.
Shelf Registration Statements and Issuance of Equity
During 2012, we established an at-the-market (“ATM”) equity issuance program providing us an efficient and low-cost platform
for raising public equity to fund our capital needs. Through this program, we have been able to effectively “match-fund” the
required equity for our Core Portfolio and Fund acquisitions through the issuance of Common Shares over extended periods
employing a price averaging strategy. Net proceeds raised through our ATM program and the below-mentioned follow-on offering
were primarily used for acquisitions and for general corporate purposes.
During January of 2012, we launched this program to provide for up to $75.0 million of gross proceeds from the sale of our
Common Stock. During August 2012, we renewed the program providing for an additional $125.0 million of gross proceeds and
again during April of 2013, providing for an additional $150.0 million of gross proceeds. For the year ended December 31, 2012,
we issued 6.1 million shares under the ATM program, generating $143.8 million of gross proceeds and $140.8 million of net
proceeds, after related issuance costs. For the year ended December 31, 2013, we issued 3.0 million shares, generating $82.2
million of gross proceeds and $80.7 million of net proceeds.
In addition, we have and intend to continue, from time to time, issuing equity in follow-on offerings separate from our ATM
program. During October 2012, we issued 3.5 million Common Shares in a separate follow-on offering for $86.9 million. Net
proceeds after related issuance costs were $85.9 million.
Asset Sales
Asset sales are an additional source of liquidity for us. Dispositions made during 2013 are discussed further in Note 2 in the Notes
to Consolidated Financial Statements.
Structured Financing Repayments
See Note 5 in the Notes to Consolidated Financial Statements, for an overview of our notes receivable and for payments received
during the years ended December 31, 2013, 2012 and 2011.
Financing and Debt
As of December 31, 2013, our outstanding mortgage, convertible notes and other notes payable aggregated $1,038.1 million, net
of unamortized premium of $1.9 million, and were collateralized by 32 properties and related tenant leases. Interest rates on our
outstanding indebtedness ranged from 1.00% to 7.25% with maturities that ranged from April 2014 to April 2023. Taking into
consideration $179.7 million of notional principal under variable to fixed-rate swap agreements currently in effect, $814.1 million
of the portfolio, or 78%, was fixed at a 5.14% weighted average interest rate and $224.0 million, or 22% was floating at a 1.55%
weighted average interest rate as of December 31, 2013. There is $57.1 million of debt maturing in 2014 at a weighted average
interest rate of 5.62%. Of this amount, $6.1 million represents scheduled annual amortization. The loans relating to $4.6 million
of the 2014 maturities provide for extension options, which we believe we will be able to exercise. As it relates to the remaining
2014 maturities, we may not have sufficient cash on hand to repay such indebtedness and, as such, we may have to refinance this
indebtedness or select other alternatives based on market conditions at that time.
44
As of December 31, 2013, we had $218.7 million of additional capacity under existing revolving debt facilities. The following
table sets forth certain information pertaining to our secured credit facilities:
Amount
borrowed
as of
December 31,
2012
Net
borrowings
(repayments)
during the year
ended December 31,
2013
Amount
borrowed
as of
December 31,
2013
Letters
of credit
outstanding as
of December 31,
2013
Amount available
under
credit
facilities
as of December 31,
2013
$
$
— $
93.1
93.1
$
— $
(24.3)
(24.3) $
— $
68.8
68.8
$
12.5
—
12.5
$
$
137.5
81.2
218.7
Total
available
credit
facilities
150.0
$
150.0
300.0
$
(dollars in millions)
Borrower
Acadia Realty, LP
Fund IV
Total
See Note 8 and Note 9 to our Consolidated Financial Statements, for a summary of our debt financing transactions during the year
ended December 31, 2013. Subsequent to December 31, 2013, we borrowed an additional $45.0 million under an existing loan
collateralized by a property. In addition, we closed on a new loan collateralized by a property for $19.0 million, $12.6 of which
has been funded.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
At December 31, 2013, maturities on our mortgage notes ranged from April 2014 to April 2023. In addition, we have non-cancelable
ground leases at eight of our shopping centers. We lease space for our White Plains corporate office for a term expiring in 2015.
The following table summarizes our debt maturities, obligations under non-cancelable operating leases and construction
commitments as of December 31, 2013:
(dollars in millions)
Payments due by period
Contractual obligations:
Future debt maturities
Interest obligations on debt
Operating lease obligations
Construction commitments (1)
Total
Total
Less than
1 year
1 to 3
years
3 to 5
years
More
than
5 years
$ 1,038.1
167.9
34.9
147.0
$ 1,387.9
$
$
57.1
47.1
2.8
147.0
254.0
$ 590.4
71.5
3.3
—
$ 665.2
$ 161.5
30.4
6.3
—
$ 198.2
$
$
229.1
18.9
22.5
—
270.5
Note:
(1) In conjunction with the redevelopment of our Core Portfolio and Fund properties, we have entered into
construction commitments with general contractors. We intend to fund these requirements with existing
liquidity.
OFF BALANCE SHEET ARRANGEMENTS
We have investments in the following joint ventures for the purpose of investing in operating properties. We account for these
investments using the equity method of accounting. As such, our financial statements reflect our share of income and loss from,
but not the individual assets and liabilities, of these joint ventures.
See Note 4 in the Notes to Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating
Partnership's pro-rata share of unconsolidated debt related to those investments is as follows:
45
(dollars in millions)
Investment
Lincoln Road Portfolio (Fund III)
Crossroads Shopping Center
Parkway Crossing
Arundel Plaza
Promenade at Manassas
White City Shopping Center
Lincoln Road Portfolio (Fund IV)
Georgetown Portfolio
Total
Pro-rata share of
mortgage debt
Operating
Partnership
Interest rate at
December 31, 2013
Maturity date
$
$
3.7
28.5
2.4
1.6
5.7
6.4
18.4
9.1
75.8
6.14%
5.37%
2.20%
5.60%
1.57%
2.77%
1.77%
4.72%
August, 2014
December, 2014
January, 2015
April, 2015
November, 2016
December, 2017
June, 2018
December, 2027
In addition to our derivative financial instruments, one of our unconsolidated affiliates is a party to two separate interest rate
LIBOR swaps with a notional value of $28.6 million, which effectively fix the interest rate at 5.54% and expire in December 2017.
The Operating Partnership's pro-rata share of the fair value of such affiliates' derivative liabilities totaled $0.3 million at
December 31, 2013
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the year ended December 31, 2013 ("2013") with the cash flow for the
year ended December 31, 2012 ("2012").
Years Ended December 31,
2012
Variance
2013
(dollars in millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Total
$
$
$
65.2
(87.9)
10.0
(12.7) $
59.0
(136.7)
79.7
2.0
$
$
6.2
48.8
(69.7)
(14.7)
A discussion of the significant changes in cash flow for 2013 versus 2012 is as follows:
The increase of $6.2 million in net cash provided by operating activities was primarily attributable to the following:
Items which contributed to an increase in cash from operating activities:
• Additional net operating income from Core and Fund Property acquisitions and redevelopments
• An increase of $6.1 million in distributions of operating income from unconsolidated affiliates
Items which contributed to a decrease in cash from operating activities:
• Additional cash of $17.2 million used to fund prepaid ground rent for Fund II's City Point project during 2013
The decrease of $48.8 million in net cash used in investing activities primarily resulted from the following:
Items which contributed to a decrease in cash used in investing activities:
• A decrease of $104.7 million in investments and advances to unconsolidated affiliates during 2013
• A decrease of $63.6 million related to advances of notes receivable during 2013
• A decrease of $21.9 million used for the acquisition of real estate during 2013
• An increase of $86.6 million in return of capital from unconsolidated affiliates
Items which contributed to an increase in cash used in investing activities:
46
• A decrease of $214.8 million in proceeds from the sale of properties during 2013
• An increase of $18.1 million used in redevelopment and improvement of properties during 2013 primarily attributable
to the redevelopment of Fund II's City Point project during 2013
The $69.7 million decrease in net cash provided by financing activities resulted primarily from the following:
Items which contributed to a decrease in cash from financing activities:
• A decrease of $142.8 million of net proceeds from the issuance of Common Shares, net of costs during 2013
• A decrease of $122.9 million in capital contributions from noncontrolling interests during 2013
• An increase of $12.0 million in dividends paid to Common Shareholders during 2013
Items which contributed to an increase in cash from financing activities:
• An additional $140.7 million in mortgage debt proceeds, net of principal payments and funding of a restricted cash account
during 2013
• A decrease of $72.8 million in distributions to noncontrolling interests during 2013
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial
Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements
requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect the significant judgments and estimates used by us in the preparation of our Consolidated
Financial Statements.
Valuation of Property Held for Use and Sale
On a quarterly basis, we review the carrying value of both properties held for use and for sale. We perform an impairment analysis
by calculating and reviewing net operating income on a property-by-property basis. We evaluate leasing projections and perform
other analyses to conclude whether an asset is impaired. We record impairment losses and reduce the carrying value of properties
when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their
carrying amounts. In cases where we do not expect to recover our carrying costs on properties held for use, we reduce our carrying
cost to fair value. For properties held for sale, we reduce our carrying value to the fair value less costs to sell. During the year
ended December 31, 2013, we determined that the value of the Walnut Hill Plaza, a Core Portfolio property, was impaired as a
result of a deterioration in the local economic environment. Accordingly, we recorded an impairment loss of $1.5 million. This
property is collateral for $23.1 million of non-recourse mortgage debt which matures October 1, 2016. Additionally, during the
year ended December 31, 2013, we entered into a firm contract to sell our Sheepshead Bay property owned by Fund III at an
amount less than the carrying value. Accordingly, we recorded an impairment loss of $6.7 million to adjust the carrying value to
the net realizable value from the sale. During the year ended December 31, 2011, we determined that the value of the Granville
Centre owned by Fund I was impaired. Accordingly, we recorded an impairment loss of $6.9 million. Granville Centre was
subsequently sold during 2011. For the year ended December 31, 2012, no impairment losses on our properties were recognized.
Management does not believe that the value of any other properties in our portfolio was impaired as of December 31, 2013.
Investments in and Advances to Unconsolidated Joint Ventures
We periodically review our investment in unconsolidated joint ventures for other than temporary declines in market value. Any
decline that is not expected to be recovered in the next twelve months is considered other than temporary and an impairment charge
is recorded as a reduction in the carrying value of the investment. During the year ended December 31, 2012, we recorded a
reduction in the carrying amount of our investments in Mervyn's of $2.0 million related to the estimated value of the remaining
assets. No impairment charges related to our investment in unconsolidated joint ventures were recognized for the years ended
December 31, 2013 and 2011. Management does not believe that the value of any other investments in unconsolidated joint ventures
was impaired as of December 31, 2013.
47
Bad Debts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make payments on
arrearages in billed rents, as well as the likelihood that tenants will not have the ability to make payments on unbilled rents including
estimated expense recoveries. We also maintain a reserve for straight-line rent receivables. For the years ended December 31,
2013 and 2012, the allowance for doubtful accounts totaled $6.0 million and $6.1 million, respectively. If the financial condition
of our tenants were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required.
Real Estate
Real estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition, redevelopment, construction and
improvement of properties, as well as significant renovations are capitalized. Interest costs are capitalized until construction is
substantially complete. Construction in progress includes costs for significant property expansion and redevelopment. Depreciation
is computed on the straight-line basis over estimated useful lives of 30 to 40 years for buildings, the shorter of the useful life or
lease term for tenant improvements and five years for furniture, fixtures and equipment. Expenditures for maintenance and repairs
are charged to operations as incurred.
Upon acquisitions of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, and
identified intangibles such as above and below market leases and acquired in-place leases and customer relationships) and acquired
liabilities in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 805 "Business Combinations" and ASC Topic 350 "Intangibles – Goodwill and Other," and allocate purchase price based
on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and
capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including
the historical operating results, known trends, and market/economic conditions that may affect the property.
Involuntary Conversion of Asset
We experienced significant flooding resulting in extensive damage to one of our properties during September 2011. Costs related
to the clean-up and redevelopment were insured to a limit sufficient that we believed would allow for full restoration of the property.
Loss of rents during the redevelopment were covered by business interruption insurance subject to a $0.1 million deductible. We
planned to restore the improvements that were damaged by the flooding and expected that the costs of such restoration and
rebuilding would be recoverable from insurance proceeds. In accordance with ASC Topic 360 "Property, Plant and Equipment"
and as a result of the above-described property damage, we provided a $0.1 million provision in the 2011 consolidated statement
of income for its exposure to the insurance deductible attributable to the loss of rents. During the year ended, December 31, 2011,
we received initial insurance proceeds of approximately $6.9 million. During the year ended December 31, 2012, we received
additional insurance proceeds of approximately $3.7 million. In connection with these proceeds, we recognized a gain on involuntary
conversion of asset of $2.4 million.
Revenue Recognition and Accounts Receivable
Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a straight-line basis over the term of
the respective leases, beginning when the tenant takes possession of the space. Certain of these leases also provide for percentage
rents based upon the level of sales achieved by the tenant. Percentage rent is recognized in the period when the tenants’ sales
breakpoint is met. In addition, leases typically provide for the reimbursement to us of real estate taxes, insurance and other property
operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred.
We make estimates of the uncollectability of our accounts receivable related to tenant revenues. An allowance for doubtful accounts
has been provided against certain tenant accounts receivable that are estimated to be uncollectible. See "Bad Debts" above. Once
the amount is ultimately deemed to be uncollectible, it is written off.
Structured Financings
Real estate notes receivable investments and preferred equity investments ("Structured Financings") are intended to be held to
maturity and are carried at cost. Interest income from Structured Financings are recognized on the effective interest method over
the expected life of the loan. Under the effective interest method, interest or fees to be collected at the origination of the Structured
Financing investment is recognized over the term of the loan as an adjustment to yield.
48
Allowances for Structured Financing investments are established based upon management’s quarterly review of the investments.
In performing this review, management considers the estimated net recoverable value of the investment as well as other factors,
including the fair value of any collateral, the amount and status of any senior debt, and the prospects for the borrower. Because
this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately
realized from the Structured Financings may differ materially from the carrying value at the balance sheet date. Interest income
recognition is generally suspended for investments when, in the opinion of management, a full recovery of income and principal
becomes doubtful. Income recognition is resumed when the suspended investment becomes contractually current and performance
is demonstrated to be resumed.
During 2012, we provided for a $0.4 million net reserve on Structured Financings as a result of a decrease in the value of the
underlying collateral properties. During January 2014, we received a $1.5 million payment on this investment, which had a net
carrying value of $0.8 million as of December 31, 2013.
During 2013, we recognized income of $2.5 million relating to the repayment of a note receivable that had previously been written
off.
INFLATION
Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions
include clauses enabling us to receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and/
or, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses
are often related to increases in the consumer price index or similar inflation indexes. In addition, many of our leases are for terms
of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if current rents are below the then
existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses
resulting from inflation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Reference is made to the Notes to Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as of December 31, 2013
Our primary market risk exposure is to changes in interest rates related to our mortgage debt. See Note 8 in the Notes to Consolidated
Financial Statements, for certain quantitative details related to our mortgage debt.
Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate
swap agreements. As of December 31, 2013, we had total mortgage and convertible notes payable of $1,038.1 million, net of
unamortized discount of $1.9 million, of which $814.1 million, or 78% was fixed-rate, inclusive of debt with rates fixed through
the use of derivative financial instruments, and $224.0 million, or 22%, was variable-rate based upon LIBOR rates plus certain
spreads. As of December 31, 2013, we were a party to 11 interest rate swap transactions and four interest rate cap transactions to
hedge our exposure to changes in interest rates with respect to $179.7 million and $140.7 million of LIBOR-based variable-rate
debt, respectively.
The following table sets forth information as of December 31, 2013 concerning our long-term debt obligations, including principal
cash flows by scheduled maturity and weighted average interest rates of maturing amounts (dollars in millions):
Consolidated mortgage debt:
49
Year
2014
2015
2016
2017
2018
Thereafter
$
$
Scheduled
amortization
Maturities
Total
6.1
5.8
2.2
1.1
0.9
4.0
20.1
$
$
51.0
268.1
314.3
80.0
79.5
225.1
1,018.0
$
$
57.1
273.9
316.5
81.1
80.4
229.1
1,038.1
Weighted average
interest rate
5.6%
2.7%
5.5%
5.7%
2.0%
4.4%
Mortgage debt in unconsolidated partnerships (at our pro-rata share):
Year
2014
2015
2016
2017
2018
Thereafter
$
$
Scheduled
amortization
Maturities
Total
1.0
0.3
0.3
0.3
0.2
2.0
4.1
$
$
31.6
3.9
5.7
6.0
18.5
6.3
72.0
$
$
Weighted average
interest rate
5.5%
3.7%
1.6%
2.8%
1.8%
4.7%
32.6
4.2
6.0
6.3
18.7
8.3
76.1
$57.1 million of our total consolidated debt and $32.6 million of our pro-rata share of unconsolidated outstanding debt will become
due in 2014. $273.9 million of our total consolidated debt and $4.2 million of our pro-rata share of unconsolidated debt will become
due in 2015. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater
than the current interest rate, our interest expense would increase by approximately $3.7 million annually if the interest rate on
the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would
be $1.1 million. Interest expense on our variable-rate debt of $224.0 million, net of variable to fixed-rate swap agreements currently
in effect, as of December 31, 2013 would increase $2.2 million if LIBOR increased by 100 basis points. After giving effect to
noncontrolling interests, our share of this increase would be $0.4 million. We may seek additional variable-rate financing if and
when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk
related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.
Based on our outstanding debt balances as of December 31, 2013, the fair value of our total consolidated outstanding debt would
decrease by approximately $18.5 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair
value of our total outstanding debt would increase by approximately $16.1 million.
As of December 31, 2013 and 2012, we had notes receivable of $126.7 million and $129.3 million, respectively. We determined
the estimated fair value of our notes receivable equated the carrying values by discounting future cash receipts utilizing a discount
rate equivalent to the rate at which similar notes receivable would be originated under conditions then existing.
Based on our outstanding notes receivable balances as of December 31, 2013, the fair value of our total outstanding notes receivable
would decrease by approximately $2.0 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the
fair value of our total outstanding notes receivable would increase by approximately $2.1 million.
Summarized Information as of December 31, 2012
As of December 31, 2012, we had total mortgage and convertible notes payable of $613.2 million of which $427.1 million, or
70% was fixed-rate, inclusive of interest rate swaps, and $186.1 million, or 30%, was variable-rate based upon LIBOR plus certain
spreads. As of December 31, 2012, we were a party to seven interest rate swap transactions and four interest rate cap transactions
to hedge our exposure to changes in interest rates with respect to $132.9 million and $141.2 million of LIBOR-based variable-
rate debt, respectively.
Interest expense on our variable debt of $186.1 million as of December 31, 2012 would have increased $1.9 million if LIBOR
increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2012, the fair value of our total
50
outstanding debt would have decreased by approximately $9.5 million if interest rates increased by 1%. Conversely, if interest
rates decreased by 1%, the fair value of our total outstanding debt would have increased by approximately $7.2 million.
Changes in Market Risk Exposures from 2012 to 2013
Our interest rate risk exposure from December 31, 2012 to December 31, 2013 has increased on an absolute basis, as the $186.1
million of variable-rate debt as of December 31, 2012 has increased to $224.0 million as of December 31, 2013. As a percentage
of our overall debt, our interest rate risk exposure has decreased as our variable-rate debt accounted for 30% of our consolidated
debt as of December 31, 2012 and was reduced to 22% as of December 31, 2013.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements beginning on page F-1 of this Form 10-K are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(i) Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of management including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
December 31, 2013 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and
forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
(ii) Internal Control Over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Management of Acadia Realty Trust is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13(a)-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 as required by the Securities
Exchange Act of 1934 Rule 13(a)-15(c). In making this assessment, we used the criteria set forth in the framework in Internal
Control–Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the
"COSO criteria"). Based on our evaluation under the COSO criteria, our management concluded that our internal control over
financial reporting was effective as of December 31, 2013 to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles.
BDO USA, LLP, an independent registered public accounting firm that audited our Financial Statements included in this Annual
Report, has issued an attestation report on our internal control over financial reporting as of December 31, 2013, which appears
in paragraph (b) of this Item 9A.
Acadia Realty Trust
White Plains, New York
February 26, 2014
51
(b) Attestation report of the independent registered public accounting firm
The Shareholders and Trustees of
Acadia Realty Trust
White Plains, New York
We have audited Acadia Realty Trust’s internal control over financial reporting as of December 31, 2013, based on criteria
established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Acadia Realty Trust’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Acadia Realty Trust maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Acadia Realty Trust as of December 31, 2013 and 2012, and the related consolidated statements
of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December
31, 2013 and our report dated February 26, 2014, expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
New York, New York
February 26, 2014
52
(c) Changes in internal control over financial reporting
There was no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2013
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None
53
PART III
In accordance with the rules of the SEC, certain information required by Part III is omitted and is incorporated by reference into
this Form 10-K from our definitive proxy statement relating to our 2014 annual meeting of stockholders (our "2014 Proxy
Statement") that we intend to file with the SEC no later than April 29, 2014.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information under the following headings in the 2014 Proxy Statement is incorporated herein by reference:
•
•
•
"PROPOSAL 1 — ELECTION OF TRUSTEES"
"MANAGEMENT"
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE"
ITEM 11. EXECUTIVE COMPENSATION.
The information under the following headings in the 2014 Proxy Statement is incorporated herein by reference:
•
•
•
•
"ACADIA REALTY TRUST COMPENSATION COMMITTEE REPORT"
"COMPENSATION DISCUSSION AND ANALYSIS"
"EXECUTIVE AND TRUSTEE COMPENSATION"
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the heading "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" in the 2014 Proxy Statement is incorporated herein by reference.
The information under Item 5. of this Form 10-K under the heading "(c) Securities authorized for issuance under equity
compensation plans" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information under the following headings in the 2014 Proxy Statement is incorporated herein by reference:
•
•
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
"PROPOSAL 1 — ELECTION OF TRUSTEES—Trustee Independence"
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information under the heading "AUDIT COMMITTEE INFORMATION" in the 2014 Proxy Statement is incorporated
herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
PART IV
1. Financial Statements: See "Index to Financial Statements" at page F-1 below.
2. Financial Statement Schedule: See "Schedule III—Real Estate and Accumulated Depreciation" at page F-46 below.
3. Exhibits: The index of exhibits below is incorporated herein by reference.
54
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereto duly authorized.
SIGNATURES
ACADIA REALTY TRUST
(Registrant)
By:
By:
By:
/s/ Kenneth F. Bernstein
Kenneth F. Bernstein
Chief Executive Officer,
President and Trustee
/s/ Jonathan W. Grisham
Jonathan W. Grisham
Senior Vice President and
Chief Financial Officer
/s/ Richard Hartmann
Richard Hartmann
Senior Vice President and
Chief Accounting Officer
Dated: February 26, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Kenneth F. Bernstein
(Kenneth F. Bernstein)
/s/ Jonathan W. Grisham
(Jonathan W. Grisham)
/s/ Richard Hartmann
(Richard Hartmann)
/s/ Douglas Crocker II
(Douglas Crocker II)
/s/ Lorrence T. Kellar
(Lorrence T. Kellar)
/s/ Wendy Luscombe
(Wendy Luscombe)
/s/ William T. Spitz
(William T. Spitz)
/s/ Lee S. Wielansky
(Lee S. Wielansky)
February 26, 2014
February 26, 2014
February 26, 2014
February 26, 2014
February 26, 2014
February 26, 2014
February 26, 2014
February 26, 2014
Chief Executive Officer,
President and Trustee
(Principal Executive Officer)
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
55
The following is an index to all exhibits including (i) those filed with this Annual Report on Form 10-K and (ii) those
incorporated by reference herein:
EXHIBIT INDEX
Exhibit No. Description
3.1 Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K filed for the year ended December 31, 2012.)
3.2 First Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K filed for the year ended December 31, 2012.)
Second Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as
Exhibit 3.3 to the Company's Annual Report on Form 10-K filed for the year ended December 31, 2012.)
3.3
3.4 Third Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as
Exhibit 3.4 to the Company's Annual Report on Form 10-K filed for the year ended December 31, 2012.)
3.5 Fourth Amendment to Declaration of Trust (incorporated by reference to the copy thereof filed as Exhibit 3.1 (a) to
the Company's Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998.)
3.6 Fifth Amendment to Declaration of Trust (incorporated by reference to the copy thereof filed as Exhibit 3.4 to the
Company's Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2009.)
3.7 Amended and Restated Bylaws of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.1
to the Company's Current Report on Form 8-K filed on November 18, 2013.)
4.1 Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (incorporated by
reference to the copy thereof filed as Exhibit 99.1 to Yale University's Schedule 13D filed on September 25, 2002.)
10.1 Amended and Restated Acadia Realty Trust 2006 Share Incentive Plan (incorporated by reference to the copy thereof
filed as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed on April 5, 2012.) (2)
10.2 Certain information regarding the compensation arrangements with certain officers of registrant (incorporated by
reference to the copy thereof filed as to Item 5.02 of the registrant's Form 8-K filed with the SEC on February 4,
2008.)
10.3 Description of Long Term Investment Alignment Program (incorporated by reference to the copy thereof filed as
Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2009.)
10.4 Form of Share Award Agreement (incorporated by reference to the copy thereof filed as Exhibit 99.1 to the Company's
Current Report on Form S-8 filed on July 2, 2003.) (2)
10.5 Registration Rights and Lock-Up Agreement (RD Capital Transaction) (incorporated by reference to the copy thereof
filed as Exhibit 99.1 (a) to the Company's Registration Statement on Form S-3 filed on March 3, 2000.)
10.6 Registration Rights and Lock-Up Agreement (Pacesetter Transaction) (incorporated by reference to the copy thereof
filed as Exhibit 99.1 (b) to the Company's Registration Statement on Form S-3 filed on March 3, 2000.)
10.7 Form of Registration Rights Agreement and Lock-Up Agreement (incorporated by reference to the copy thereof filed
as Exhibit 10.4 to the Company's Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003.)
56
10.8 Contribution and Share Purchase Agreement dated as of April 15, 1998 among Mark Centers Trust, Mark Centers
Limited Partnership, the Contributing Owners and Contributing Entities named therein, RD Properties, L.P. VI, RD
Properties, L.P. VIA and RD Properties, L.P. VIB (incorporated by reference to the copy thereof filed as Exhibit
10.1 to the Company's Form 8-K filed on April 20, 1998.)
10.9 Agreement of Contribution among Acadia Realty Limited Partnership, Acadia Realty Trust and Klaff Realty, LP and
Klaff Realty, Limited (incorporated by reference to the copy thereof filed as Exhibit 10.8 to the Company's Annual
Report on Form 10-K filed for the fiscal year ended December 31, 2003.)
10.10 Employment agreement between the Company and Kenneth F. Bernstein dated October 1998 (incorporated by
reference to the copy thereof filed as Exhibit 10.34 to the Company's Annual Report on Form10-K filed for the fiscal
year ended December 31, 1998.) (2)
10.11 First Amendment to Employment Agreement between the Company and Kenneth Bernstein dated as of January 1,
2001 (incorporated by reference to the copy thereof filed as Exhibit 10.54 to Company's Quarterly Report on Form
10-Q filed for the quarter ended June 30, 2001.) (2)
10.12 Fourth Amendment to employment agreement between the Company and Kenneth F. Bernstein dated January 19,
2007 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form
8-K filed on January 24, 2007.) (2)
10.13 Fifth Amendment to Employment Agreement between the Company and Kenneth F. Bernstein dated August 5, 2008
(incorporated by reference to the copy thereof filed as Exhibit 10.19 to the Company's Quarterly Report on Form
10-Q filed for the quarter ended March 31, 2010.) (2)
10.14 Sixth Amendment to the Employment Agreement between the Company and Kenneth F. Bernstein dated March 7,
2011 (incorporated by reference to the copy thereof filed as Exhibit 99.1 to the Company's Current Report on Form
8-K filed on March 9, 2011.) (2)
10.15 Form of Amended and Restated Severance Agreement, dated June 12, 2008, that was entered into with each of Joel
Braun, Executive Vice President and Chief Investment Officer; Michael Nelsen, Senior Vice President and Chief
Financial Officer; Robert Masters, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary;
and Joseph Hogan, Senior Vice President and Director of Construction (incorporated by reference to the copy thereof
filed as Exhibit 10.1 to the Company's Form 8-K filed on June 12, 2008.) (2)
10.16 First Amendment to Severance Agreements between the Company and Joel Braun Executive Vice President and
Chief Investment Officer, Michael Nelsen, Senior Vice President and Chief Financial Officer, Robert Masters, Senior
Vice President, General Counsel, Chief Compliance Officer and Secretary and Joseph Hogan, Senior Vice President
and Director of Construction dated January 19, 2007 (incorporated by reference to the copy thereof filed as Exhibits
10.2, 10.3, 10.4 and 10.5 to the Company's Current Report on Form 8-K filed on January 24, 2007.) (2)
10.17 Amended and Restated Severance Agreement, dated April 19, 2011, that was entered into with Christopher Conlon,
Senior Vice President, Leasing and Development (incorporated by reference to the copy thereof filed as Exhibit
10.43 to the Company's Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2011.) (2)
10.18 Amended and Restated Loan Agreement among Acadia Cortlandt LLC and Bank of America, N.A., Note between
Acadia Cortlandt LLC and Bank of America, N.A., Note Consolidation and Modification Agreement between Acadia
Cortlandt LLC and Bank of America, N.A., Note between Acadia Cortlandt LLC and Bank of America, N.A.,
Mortgage Consolidation and Modification Agreement between Acadia Cortlandt LLC and Bank of America, N.A.,
Mortgage Security Agreement between Acadia Cortlandt LLC and Bank of America, N.A. and Amended and Restated
Guaranty Agreement between Acadia Cortlandt LLC and Bank of America, N.A., all dated October 26, 2010
(incorporated by reference to the copy thereof filed as Exhibit 10.36 to the Company's Annual Report on Form 10-
K filed for the year ended December 31, 2010.)
10.19 Revolving Credit Agreement Dated as of November 21, 2012 by and among Acadia Strategic Opportunity Fund IV
LLC as Borrower, Acadia Realty Acquisition IV LLC as Borrowers Managing Member, Acadia Realty Limited
Partnership as Guarantor, Acadia Realty Trust as Guarantor General Partner, Acadia Investors IV Inc. as Pledgor and
Bank of America, N.A. as Administrative Agent, Structuring Agent, Sole Bookrunner, Sole Lead Arranger, Letter of
Credit Issuer, and Lender (incorporated by reference to the copy thereof filed as Exhibit 10.23 to the Company's
Annual Report on Form 10-K filed for the year ended December 31, 2012.)
57
10.20 Credit Agreement, dated as of January 31, 2013, among Acadia Realty Limited Partnership, as the Borrower, and
Acadia Realty Trust and Certain Subsidiaries of Acadia Realty Limited Partnership from time to time party
thereto, as Guarantors, Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer, and as a
Lender, PNC Bank, National Association and Wells Fargo Bank, National Association, as Co-Documentation
Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as a Joint Lead Arranger and Sole Bookrunner and
PNC Bank, National Association and Wells Fargo Securities, LLC, as Joint Lead Arrangers. (incorporated by
reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
February 5, 2013.)
10.21 Agreement and Plan Of Merger Dated as of December 22, 2005 by and among Acadia Realty Acquisition I, LLC,
Ara Btc LLC, ARA MS LLC, ARA BS LLC, ARA BC LLC and ARA BH LLC, Acadia Investors, Inc., AII BTC
LLC, AII MS LLC, AII BS LLC, AII BC LLC And AII BH LLC, Samuel Ginsburg 2000 Trust Agreement #1, Martin
Ginsburg 2000 Trust Agreement #1, Martin Ginsburg, Samuel Ginsburg and Adam Ginsburg, and GDC SMG, LLC,
GDC Beechwood, LLC, Aspen Cove Apartments, LLC and SMG Celebration, LLC (incorporated by reference to
the copy thereof filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on January 4, 2006.)
10.22 Agreement of Purchase and Sale between Acadia Pelham Manor LLC, Acadia East Fordham Acquisitions LLC,
Fordham Place Office LLC, as Sellers and RPAI Acquisitions, Inc., as Purchaser. (incorporated by reference to the
copy thereof filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on November 6, 2013.)
10.23 Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference
to the copy thereof filed as Exhibit 10.1 (c) to the Company's Registration Statement on Form S-3 filed on March
3, 2000.)
10.24 First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership (incorporated by reference to the copy thereof filed as Exhibit 10.1 (d) to the Company's Registration
Statement on Form S-3 filed on March 3, 2000.)
10.24 Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(incorporated by reference to the copy thereof filed as Exhibit 99.3 to the Company's Annual Report on Form 10-K
filed for the fiscal year ended December 31, 2003.)
10.25 Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(incorporated by reference to the copy thereof filed as Exhibit 99.4 to the Company's Annual Report on Form 10-K
filed for the fiscal year ended December 31, 2003.)
21 List of Subsidiaries of Acadia Realty Trust (1)
23.1 Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms
S-8 (1)
31.1 Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2 Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (1)
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (1)
99.1 Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia
Realty Limited Partnership (incorporated by reference to the copy thereof filed as Exhibit 99.5 to Company's Quarterly
Report on Form 10-Q filed for the quarter ended June 30, 1997.)
58
99.2 Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia
Realty Limited Partnership (incorporated by reference to the copy thereof filed as Exhibit 99.6 to the Company's
Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003.)
101.INS XBRL Instance Document* (1)
101.SCH XBRL Taxonomy Extension Schema Document* (1)
101.CAL XBRL Taxonomy Extension Calculation Document* (1)
101.DEF XBRL Taxonomy Extension Definitions Document* (1)
101.LAB XBRL Taxonomy Extension Labels Document* (1)
101.PRE XBRL Taxonomy Extension Presentation Document* (1)
* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the
Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Notes:
(1) Filed herewith.
(2) Management contract or compensatory plan or arrangement.
59
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Schedule III – Real Estate and Accumulated Depreciation
F-2
F-3
F-4
F-5
F-6
F-9
F-11
F-46
F-1
Report of Independent Registered Public Accounting Firm
The Shareholders and Trustees of
Acadia Realty Trust
White Plains, New York
We have audited the accompanying consolidated balance sheets of Acadia Realty Trust and its subsidiaries as of December 31,
2013 and 2012 and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2013. In connection with our audits of the consolidated financial
statements, we have also audited the financial statement schedule listed in the accompanying index. These consolidated financial
statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and the schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Acadia Realty Trust at December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States
of America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Acadia Realty Trust's internal control over financial reporting as of December 31, 2013, based on criteria established in Internal
Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated February 26, 2014 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
New York, New York
February 26, 2014
F-2
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
Operating real estate
Land
Buildings and improvements
Construction in progress
Less: accumulated depreciation
Net operating real estate
Real estate under development
Notes receivable and preferred equity investments, net
Investments in and advances to unconsolidated affiliates
Cash and cash equivalents
Cash in escrow
Restricted cash
Rents receivable, net
Deferred charges, net
Acquired lease intangibles, net
Prepaid expenses and other assets
Assets of discontinued operations
Total assets
LIABILITIES
Mortgage and other notes payable
Convertible notes payable
Distributions in excess of income from, and investments in, unconsolidated affiliates
Accounts payable and accrued expenses
Dividends and distributions payable
Acquired lease intangibles, net
Other liabilities
Liabilities of discontinued operations
Total liabilities
EQUITY
Shareholders' Equity
Common shares, $.001 par value, authorized 100,000,000 shares, issued and outstanding
55,643,068 and 52,482,598 shares, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2013
2012
$
336,251
1,140,613
4,836
1,481,700
229,538
1,252,162
337,353
126,656
181,322
79,189
19,822
109,795
29,574
30,775
33,663
44,212
20,434
$ 2,264,957
$ 1,039,617
380
8,701
38,050
13,455
22,394
18,265
2,507
1,143,369
$
276,109
786,699
2,507
1,065,315
169,718
895,597
221,883
129,278
221,904
91,813
15,846
—
18,177
18,858
28,576
28,231
238,277
$ 1,908,440
$
612,251
930
22,707
27,699
9,674
14,115
14,652
136,156
838,184
56
665,301
1,132
37,747
704,236
417,352
1,121,588
$ 2,264,957
52
581,925
(4,307)
45,127
622,797
447,459
1,070,256
$ 1,908,440
The accompanying notes are an integral part of these consolidated financial statements
F-3
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share amounts)
Revenues
Rental income
Interest income
Expense reimbursements
Other
Total revenues
Operating Expenses
Property operating
Other operating
Real estate taxes
General and administrative
Reserve for notes receivable
Depreciation and amortization
Total operating expenses
Operating income
Equity in earnings of unconsolidated affiliates
Gain on sale of unconsolidated affiliates
Impairment of unconsolidated affiliates
Impairment of asset
(Loss) gain on debt extinguishment
Gain on involuntary conversion of asset
Interest and other finance expense
Income from continuing operations before income taxes
Income tax (provision) benefit
Income from continuing operations
Discontinued operations
Operating income from discontinued operations
Impairment of asset
Loss on debt extinguishment
Gain on sale of properties
Income from discontinued operations
Net income
Noncontrolling interests
Continuing operations
Discontinued operations
Net income attributable to noncontrolling interests
Net income attributable to Common Shareholders
Basic earnings per share
Income from continuing operations
Income from discontinued operations
Basic earnings per share
Diluted earnings per share
Income from continuing operations
Income from discontinued operations
Diluted earnings per share
Years ended December 31,
2012
2011
2013
$
$
$
$
$
$
122,730
11,800
28,373
5,383
168,286
21,026
4,605
20,922
25,555
—
40,299
112,407
55,879
12,382
—
—
(1,500)
(765)
—
(39,474)
26,522
(19)
26,503
6,818
(6,683)
(800)
18,802
18,137
44,640
7,523
(12,048)
(4,525)
40,115
0.61
0.11
0.72
0.61
0.11
0.72
$
$
84,002
8,027
20,433
2,525
114,987
17,430
3,899
16,387
21,223
405
27,888
87,232
27,755
550
3,061
(2,032)
—
(198)
2,368
(22,811)
8,693
574
9,267
12,007
—
(2,541)
71,203
80,669
89,936
14,352
(64,582)
(50,230)
39,706
0.51
0.34
0.85
0.51
0.34
0.85
$
$
$
$
$
$
$
$
$
$
65,781
11,705
17,868
2,503
97,857
13,417
1,455
13,156
22,996
—
20,975
71,999
25,858
1,555
—
—
—
1,268
—
(23,343)
5,338
(461)
4,877
8,933
(6,925)
—
46,830
48,838
53,715
13,734
(15,894)
(2,160)
51,555
0.45
0.80
1.25
0.45
0.80
1.25
The accompanying notes are an integral part of these consolidated financial statements
F-4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31,
2012
2011
2013
(dollars in thousands)
Net income
Other Comprehensive income (loss):
$
44,640
$
89,936
$
53,715
Unrealized gain (loss) on valuation of swap agreements
Reclassification of realized interest on swap agreements
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Common Shareholders
$
3,610
2,892
6,502
51,142
(5,588)
45,554
$
(3,519)
2,268
(1,251)
88,685
(49,373)
39,312
$
(5,611)
3,081
(2,530)
51,185
(686)
50,499
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands,
except per share amounts)
Common
Shares
Share
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Common
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance at January 1, 2011
40,254
$
40
$ 303,823
$
(2,857) $ 17,206
$
318,212
$
269,310
$ 587,522
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Dividends declared ($0.72
per Common Share)
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive income
(loss):
Net income
Unrealized loss on valuation
of swap agreements
Reclassification of realized
interest on swap agreements
Total comprehensive (loss)
income
11
2,250
—
71
—
—
42,586
—
—
—
—
Balance at December 31,
2011
42,586
—
2
—
1
—
—
43
—
—
—
—
43
56
44,658
—
130
—
—
—
—
—
—
—
—
—
—
56
(56)
—
44,660
—
44,660
— (29,444)
(29,444)
(984)
(30,428)
—
—
—
—
—
—
131
—
—
5,991
6,122
(7,697)
(7,697)
117,945
384,509
117,945
718,124
— 51,555
51,555
2,160
53,715
(3,461)
(2,150)
(5,611)
(3,461)
2,405
—
—
2,405
(1,056)
51,555
50,499
676
686
3,081
51,185
348,667
(2,857)
(12,238)
333,615
348,667
(3,913)
39,317
384,114
385,195
769,309
F-6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands,
except per share amounts)
Common
Shares
Share
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Common
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
334
—
5,880
9,510
9
226,712
—
—
—
—
5,880
(5,880)
—
226,721
—
226,721
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Dividends declared ($0.72
per Common Share)
Issuance of OP Units to
acquire real estate
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive income
(loss):
Net income
Unrealized loss on valuation
of swap agreements
Reclassification of realized
interest on swap agreements
Total comprehensive (loss)
income
—
—
52
—
—
52,482
—
—
—
—
Balance at December 31,
2012
52,482
—
—
—
—
—
52
—
—
—
—
52
—
—
666
—
—
— (33,896)
(33,896)
(1,098)
(34,994)
—
—
—
—
—
—
—
—
—
666
—
—
2,279
2,279
6,025
6,691
(160,663)
(160,663)
172,228
398,086
172,228
981,571
581,925
(3,913)
5,421
583,485
—
—
—
—
— 39,706
39,706
50,230
89,936
(1,815)
1,421
—
—
(1,815)
(1,704)
(3,519)
1,421
847
2,268
(394)
39,706
39,312
49,373
88,685
581,925
(4,307)
45,127
622,797
447,459
1,070,256
F-7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands,
except per share amounts)
Common
Shares
Share
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Common
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Issuance of OP Units to
acquire real estate
Dividends declared ($0.86
per Common Share)
Employee and trustee stock
compensation, net
Consolidation of previously
unconsolidated investment
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive income:
Net income
Unrealized income on
valuation of swap
agreements
Reclassification of realized
interest on swap agreements
Total comprehensive income
Balance at December 31,
2013
93
3,013
—
—
55
—
—
—
55,643
—
—
—
—
—
4
—
—
—
—
—
—
56
—
—
—
—
1,548
80,686
—
—
1,142
—
—
—
—
—
—
—
—
—
1,548
(1,548)
—
80,690
—
80,690
—
33,300
33,300
— (47,495)
(47,495)
(1,664)
(49,159)
—
—
—
—
—
—
—
—
1,142
6,530
7,672
—
—
—
(33,949)
(33,949)
(87,688)
(87,688)
49,324
49,324
665,301
(4,307)
(2,368)
658,682
411,764
1,070,446
—
—
—
—
— 40,115
40,115
4,525
44,640
3,541
1,898
—
—
3,541
1,898
69
994
3,610
2,892
5,439
40,115
45,554
5,588
51,142
55,643
$
56
$ 665,301
$
1,132
$ 37,747
$
704,236
$
417,352
$1,121,588
The accompanying notes are an integral part of these consolidated financial statements.
F-8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
2012
2011
2013
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization
Amortization of financing costs
Gain on sale of property
Loss (gain) on debt extinguishment
Gain on involuntary conversion of asset
Reserve for notes receivable
Impairment of asset
Amortization of discount on convertible debt
Share compensation expense
Equity in earnings of unconsolidated affiliates
Distributions of operating income from unconsolidated affiliates
Other, net
Changes in assets and liabilities
Cash in escrow
Rents receivable, net
Prepaid expenses and other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate
Redevelopment and property improvement costs
Deferred leasing costs
Insurance proceeds from involuntary conversion of asset
Investments in and advances to unconsolidated affiliates
Return of capital from unconsolidated affiliates
Consolidation of previously unconsolidated investment
Proceeds from notes receivable
Issuance of notes receivable
Proceeds from sale of properties
Net cash used in investing activities
$
44,640
$
89,936
$
53,715
43,071
3,082
(18,802)
1,565
—
—
8,183
—
7,667
(12,382)
9,829
(4,771)
218
997
(22,524)
5,586
(1,126)
65,233
(220,041)
(106,883)
(4,617)
—
(56,171)
108,899
1,864
29,583
(45,050)
204,537
(87,879)
38,769
3,569
(71,203)
2,739
(2,368)
405
—
—
3,350
(1,579)
3,733
278
2,035
(6,757)
1,033
(5,648)
709
59,001
(241,894)
(88,787)
(7,275)
3,672
(160,888)
22,296
—
25,388
(108,629)
419,372
(136,745)
33,683
3,918
(46,830)
(1,268)
—
—
6,925
829
3,682
(1,555)
5,515
(62)
7,319
(8,894)
(4,872)
14,513
(903)
65,715
(116,408)
(65,090)
(6,298)
—
(54,981)
4,504
—
56,519
(34,343)
62,940
(153,157)
F-9
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
2012
2011
2013
(dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes
Proceeds received on mortgage and other notes
Loan proceeds held as restricted cash
Purchase of convertible notes payable
Deferred financing and other costs
Capital contributions from noncontrolling interests
Distributions to noncontrolling interests
Dividends paid to Common Shareholders
Proceeds from issuance of Common Shares, net of issuance costs of $1,645,
$3,054, and $206 respectively
Net cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of cash flow information
Cash paid during the period for interest, net of capitalized interest of $9,193,
$5,955, and $4,850, respectively
Cash paid for income taxes
Supplemental disclosure of non-cash investing activities
Acquisition of real estate through assumption of debt
Acquisition of real estate through issuance of OP Units
Acquisition of real estate through conversion of notes receivable
Consolidation of previously unconsolidated investment
Real estate, net
Mortgage notes payable
Distributions in excess of income from, and investments in, unconsolidated
affiliates
Other assets and liabilities
Noncontrolling interest
Cash included in consolidation of previously unconsolidated investment
(437,257)
572,443
(109,795)
(550)
(11,741)
49,324
(88,975)
(44,115)
(549,095)
433,815
—
—
(6,772)
172,228
(161,765)
(32,143)
(161,389)
144,959
—
(48,997)
(2,877)
117,945
(8,605)
(29,033)
80,688
10,022
223,477
79,745
44,659
56,662
(12,624)
91,813
79,189
41,543
301
2,001
89,812
91,813
32,327
941
$
$
$
— $
$
$
33,300
18,500
63,766
2,279
14,000
$
$
$
$
$
$
$
$
$
$
$
$
$ (118,484) $
166,200
(10,298)
(1,605)
(33,949)
1,864
$
$
— $
—
—
—
—
— $
(30,780)
120,592
89,812
32,120
3,776
—
—
—
—
—
—
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Acadia Realty Trust (the "Trust") and subsidiaries (collectively, the "Company"), is a fully-integrated equity real estate investment
trust ("REIT") focused on the ownership, acquisition, redevelopment, and management of high-quality retail properties located
primarily in high-barrier-to-entry, supply constrained, densely-populated metropolitan areas in the United States along the East
Coast and in Chicago.
All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the
"Operating Partnership") and entities in which the Operating Partnership owns an interest. As of December 31, 2013, the Trust
controlled approximately 97% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled
to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The
limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the
Operating Partnership in exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred
OP Units") and employees who have been awarded restricted Common OP Units ("LTIP Units") as long-term incentive
compensation (Note 15). Limited partners holding Common OP and LTIP Units are generally entitled to exchange their units on
a one-for-one basis for common shares of beneficial interest of the Trust ("Common Shares"). This structure is referred to as an
umbrella partnership REIT or "UPREIT."
As of December 31, 2013, the Company has ownership interests in 77 properties within its core portfolio, which consist of those
properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries
thereof, not including those properties owned through its funds ("Core Portfolio"). The Company also has ownership interests in
28 properties within its funds, Acadia Strategic Opportunity Fund I, LP ("Fund I"), Acadia Strategic Opportunity II, LLC ("Fund
II"), Acadia Strategic Opportunity Fund III LLC ("Fund III") and Acadia Strategic Opportunity Fund IV LLC (("Fund IV") and
together with Funds I, II, and III, the "Funds"). The 105 Core Portfolio and Fund properties primarily consist of urban/street retail,
dense suburban neighborhood and community shopping centers and mixed-use properties with a strong retail component. In
addition, the Company, together with the investors in the Funds, invest in operating companies through Acadia Mervyn Investors
I, LLC ("Mervyns I"), Acadia Mervyn Investors II, LLC ("Mervyns II") and Fund II, all on a non-recourse basis.
The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns I and II and earns fees or
priority distributions for asset management, property management, construction, redevelopment, leasing, and legal services. Cash
flows from the Funds and Mervyns I and II are distributed pro-rata to their respective partners and members (including the Operating
Partnership) until each receives a certain cumulative return ("Preferred Return"), and the return of all capital contributions.
Thereafter, remaining cash flow is distributed 20% to the Operating Partnership ("Promote") and 80% to the partners or members
(including the Operating Partnership).
Following is a table summarizing the general terms and Operating Partnership's equity interests in the Funds and Mervyns I and
II:
Entity
Formation
Date
Operating
Partnership
Share of
Capital
Committed
Capital
Capital
Called as of
December 31,
2013
Equity
Interest Held
By Operating
Partnership
Capital
Returned as of
December 31,
2013
Preferred
Return
Fund I and Mervyns I (1)
9/2001
22.22% $
90.0
$
86.6
37.78%
9% $
Fund II and Mervyns II (2)
6/2004
20.00%
300.0
Fund III (3)
Fund IV
5/2007
5/2012
19.90%
23.12%
475.0
540.6
300.0
357.5
95.9
20.00%
19.90%
23.12%
8%
6%
6%
86.6
131.6
203.5
—
F-11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
Notes:
(1) Fund I and Mervyns I have returned all capital and preferred return. The Operating Partnership is now entitled to a Promote on all future
cash distributions.
(2) During 2013, a distribution of $47.1 million was made to the Fund II investors, including the Operating Partnership. This amount is subject
to recontribution to Fund II until December 2016, if needed to fund the on-going development and construction of existing projects.
(3) Original committed capital of Fund III was $502.5 million. During 2012, this amount was reduced to $475.0 million.
Principles of Consolidation
The consolidated financial statements include the consolidated accounts of the Company and its controlling investments in
partnerships and limited liability companies in which the Company has control in accordance with Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") Topic 810 "Consolidation" ("ASC Topic 810"). The ownership
interests of other investors in these entities are recorded as noncontrolling interests. All significant intercompany balances and
transactions have been eliminated in consolidation. Investments in entities for which the Company has the ability to exercise
significant influence over, but does not have financial or operating control, are accounted for using the equity method of accounting.
Accordingly, the Company’s share of the earnings (or losses) of these entities are included in consolidated net income.
Variable interest entities are accounted for within the scope of ASC Topic 810 and are required to be consolidated by their primary
beneficiary. The primary beneficiary of a variable interest entity is the enterprise that has the power to direct the activities that
most significantly impact the variable interest entity’s economic performance and the obligation to absorb losses or the right to
receive benefits of the variable interest entity that could be significant to the variable interest entity. Management has evaluated
the applicability of ASC Topic 810 to its investments in certain joint ventures and determined that these joint ventures are not
variable interest entities or that the Company is not the primary beneficiary and, therefore, consolidation of these ventures is not
required. These investments are accounted for using the equity method of accounting.
The Company owns a 22.22% interest in an approximately one million square foot retail portfolio (the "Brandywine Portfolio")
located in Wilmington, Delaware. Effective January 1, 2013, following certain changes in the financial and operating controls of
the joint venture agreement, the Company now accounts for this investment on a consolidated basis.
Investments in and Advances to Unconsolidated Joint Ventures
The Company primarily accounts for its investments in unconsolidated joint ventures using the equity method as it does not
exercise control over significant asset decisions such as buying, selling or financing nor is it the primary beneficiary under ASC
Topic 810, as discussed above in most of these investments. The Company does have significant influence over most of these
investments, which requires equity method accounting. Under the equity method, the Company increases its investment for its
proportionate share of net income and contributions to the joint venture and decreases its investment balance by recording its
proportionate share of net loss and distributions. The Company accounts for some of its investments under the cost method. Due
to its minor ownership of three investments as well as the terms of the underlying operating agreements, the Company has no
influence over such entities' operating and financial policies. Other than the minority investor rights to which the Company is
entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers
of these investments. The Company has no rights with respect to the control and operation of these investments vehicles, nor with
the formulation and execution of business and investment policies. The Company recognizes income for distributions in excess
of its investment where there is no recourse to the Company. For investments in which there is recourse to the Company, distributions
in excess of the investment are recorded as a liability. Although the Company accounts for its investment in Albertson’s (Note 4)
under the equity method of accounting, the Company adopted the policy of not recording its equity in earnings or losses of this
unconsolidated affiliate until it receives the audited financial statements of Albertson’s to support the equity earnings or losses in
accordance with ASC Topic 323, "Investments – Equity Method and Joint Ventures."
F-12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
The Company periodically reviews its investment in unconsolidated joint ventures for other-than-temporary losses in investment
value. Any decline that is not expected to be recovered is considered other than temporary and an impairment charge is recorded
as a reduction in the carrying value of the investment. During 2012, the Company recorded an impairment charge of $2.0 million
in connection with the estimated fair value in its investment in Mervyns. During the years ended December 31, 2013 and 2011,
there were no impairment charges related to the Company’s investment in unconsolidated joint ventures.
Use of Estimates
Accounting principles generally accepted in the United States of America ("GAAP") require the Company’s management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant
assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition and the collectability of
notes receivable and rents receivable. Application of these estimates and assumptions requires the exercise of judgment as to future
uncertainties and, as a result, actual results could differ from these estimates.
Real Estate
Real estate assets are stated at cost less accumulated depreciation. Construction in progress includes costs for significant property
expansion and redevelopment. Depreciation is computed on the straight-line basis over estimated useful lives of 30 to 40 years
for buildings, the shorter of the useful life or lease term for tenant improvements and five years for furniture, fixtures and equipment.
Expenditures for maintenance and repairs are charged to operations as incurred.
Upon acquisitions of real estate, the Company assesses the fair value of acquired assets and assumed liabilities (including land,
buildings and improvements, and identified intangibles such as above and below market leases and acquired in-place leases and
customer relationships) and acquired liabilities in accordance with ASC Topic 805 "Business Combinations" and ASC Topic 350
"Intangibles – Goodwill and Other," and allocates the acquisition price based on these assessments. Fixed-rate renewal options
have been included in the calculation of the fair value of acquired leases where applicable. To the extent there were fixed-rate
options at below-market rental rates, the Company included these along with the current term below-market rent in arriving at the
fair value of the acquired leases. The discounted difference between contract and market rents is being amortized over the remaining
applicable lease term, inclusive of any option periods. The Company assesses fair value based on estimated cash flow projections
that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based
on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect
the property.
The Company capitalizes certain costs related to the development and redevelopment of real estate including pre-construction
costs, interest, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved with the
specific project. Additionally, the Company capitalizes interest costs related to development and redevelopment activities.
Capitalization of these costs begin when the activities and related expenditures commence, and cease when the property is held
available for occupancy upon substantial completion of tenant improvements, but no later than one year from the completion of
major construction activity at which time the project is placed in service and depreciation commences.
The Company reviews its long-lived assets for impairment when there is an event or a change in circumstances that indicates that
the carrying amount may not be recoverable. The Company measures and records impairment losses and reduces the carrying
value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties
are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held
for use, the Company reduces its carrying costs to fair value, and for properties held for sale, the Company reduces its carrying
value to the fair value less costs to sell. During the year ended December 31, 2013, the Company determined that the values of
the Walnut Hill Plaza and Fund III's Sheepshead Bay property were impaired. Accordingly, impairment charges of $1.5 million
and $6.7 million, respectively were recorded. The Operating Partnership's share of the impairment charge related to Sheepshead
Bay was $1.3 million. During the year ended December 31, 2011, the Company determined that the value of the Granville Centre
owned by Fund I was impaired. Accordingly, an impairment loss of $6.9 million was recorded, of which the Operating Partnership's
share was $1.5 million. During the year ended December 31, 2012, no impairment charges were recorded. Management does not
believe that the values of any other properties within the portfolio are impaired as of December 31, 2013.
F-13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
The Company recognizes property sales in accordance with ASC Topic 970 "Real Estate." The Company generally records the
sales of operating properties and outparcels using the full accrual method at closing when the earnings process is deemed to be
complete. Sales not qualifying for full recognition at the time of sale are accounted for under other appropriate deferral methods.
The Company evaluates the held-for-sale classification of its real estate each quarter. Assets that are classified as held for sale are
recorded at the lower of their carrying amount or fair value less cost to sell. Assets are generally classified as held for sale once
management has initiated an active program to market them for sale and has received a firm purchase commitment. The results
of operations of these real estate properties are reflected as discontinued operations in all periods presented.
On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these
circumstances, the Company will classify the properties as held for sale when a sales contract is executed with no contingencies
and the prospective buyer has funds at risk to ensure performance.
Involuntary Conversion of Asset
The Company experienced significant flooding resulting in extensive damage to one of its properties during September 2011.
Costs related to the clean-up and redevelopment were insured for an amount sufficient that would allow for full restoration of the
property. Loss of rents during the redevelopment were covered by business interruption insurance subject to a $0.1 million
deductible.
In accordance with ASC Topic 360 "Property, Plant and Equipment" and as a result of the above-described property damage, the
Company had recorded a write-down of the asset's carrying value of approximately $1.4 million, as well as an insurance recovery
in the same amount that is included in Prepaid Expenses and Other Assets in the accompanying consolidated balance sheets as of
December 31, 2011. The Company also provided a $0.1 million provision in the 2011 consolidated statement of income for its
exposure to the insurance deductible attributable to the loss of rents. During the years ended December 31, 2012 and 2011, the
Company received insurance proceeds of approximately $3.7 million and $6.9 million, respectively. The Company recognized a
gain on involuntary conversion of $2.4 million in 2012 as these proceeds exceeded the asset's net basis.
Deferred Costs
Fees and costs paid in the successful negotiation of leases are deferred and amortized on a straight-line basis over the terms of the
respective leases. Fees and costs incurred in connection with obtaining financing are deferred and amortized over the term of the
related debt obligation. The Company capitalizes salaries, commissions and benefits related to time spent by leasing and legal
department personnel involved in originating leases.
Management Contracts
Income from management contracts is recognized on an accrual basis as such fees are earned. The initial acquisition costs of any
management contracts are amortized over the estimated lives of the contracts acquired.
Revenue Recognition and Accounts Receivable
Leases with tenants are accounted for as operating leases. Minimum rents are recognized, net of any rent concessions or tenant
lease incentives, including free rent, on a straight-line basis over the term of the respective leases, beginning when the tenant is
entitled to take possession of the space. As of December 31, 2013 and 2012, unbilled rents receivable relating to the straight-lining
of rents of $23.1 million and $23.6 million, respectively are included in Rents Receivable, net on the accompanying consolidated
balance sheets. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the tenant.
Percentage rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically provide for the
reimbursement to the Company of real estate taxes, insurance and other property operating expenses. These reimbursements are
recognized as revenue in the period the related expenses are incurred.
F-14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
The Company makes estimates of the uncollectability of its accounts receivable related to tenant revenues. An allowance for
doubtful accounts has been provided against certain tenant accounts receivable that are estimated to be uncollectible. Once the
amount is ultimately deemed to be uncollectible, it is written off. Rents receivable at December 31, 2013 and 2012 are shown net
of an allowance for doubtful accounts of $6.0 million and $6.1 million, respectively.
Notes Receivable and Preferred Equity
Notes receivable and preferred equity investments are intended to be held to maturity and are carried at amortized cost. Interest
income from notes receivable and preferred equity investments are recognized on the effective interest method over the expected
life of the loan. Under the effective interest method, interest or fees collected at the origination of the investment or the payoff of
the investment are recognized over the term of the loan as an adjustment to yield.
Allowances for real estate notes receivable are established based upon management’s quarterly review of the investments. In
performing this review, management considers the estimated net recoverable value of the loan as well as other factors, including
the fair value of any collateral, the amount and status of any senior debt, and the prospects for the borrower. Because this
determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized
from the loans may differ materially from their carrying values at the balance sheet date. Interest income recognition is generally
suspended for loans when, in the opinion of management, a full recovery of income and principal becomes doubtful. Income
recognition is resumed when the suspended loan becomes contractually current and performance is demonstrated to be resumed.
During 2012, the Company provided a $0.4 million net reserve on note receivables as a result of changes in the value of the
underlying collateral properties.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed the federally
insured limit by the Federal Deposit Insurance Corporation. The Company has never experienced any losses related to these
balances.
Restricted Cash and Cash in Escrow
Restricted cash and cash in escrow consist principally of cash held for real estate taxes, construction costs, property maintenance,
insurance, minimum occupancy and property operating income requirements at specific properties as required by certain loan
agreements.
Income Taxes
The Company has made an election to be taxed, and believes it qualifies, as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"). To maintain REIT status for Federal income tax purposes, the Company is
generally required to distribute at least 90% of its REIT taxable income to its shareholders as well as comply with certain other
income, asset and organizational requirements as defined in the Code. Accordingly, the Company is generally not subject to
Federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.
Although it may qualify for REIT status for Federal income tax purposes, the Company is subject to state income or franchise
taxes in certain states in which some of its properties are located. In addition, taxable income from non-REIT activities managed
through the Company’s taxable REIT subsidiaries ("TRS") is fully subject to Federal, state and local income taxes.
The Company accounts for TRS income taxes under the liability method as required by ASC Topic 740, "Income Taxes." Under
the liability method, deferred income taxes are recognized for the temporary differences between the GAAP basis and tax basis
of the TRS income, assets and liabilities.
F-15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continued
In accordance with ASC Topic 740, the Company believes that it has appropriate support for the income tax positions taken and,
as such, does not have any uncertain tax positions that, if successfully challenged, could result in a material impact on the Company's
financial position or results of operation. The prior three years' income tax returns are subject to review by the Internal Revenue
Service. The Company recognizes potential interest and penalties related to uncertain tax positions as a component of the provision
for income taxes.
Stock-based Compensation
The Company accounts for stock-based compensation pursuant to ASC Topic 718, "Compensation – Stock Compensation." As
such, all equity based awards are reflected as compensation expense in the Company’s consolidated financial statements over their
vesting period based on the fair value at the date of grant.
Recent Accounting Pronouncements
During July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, "Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 requires
an entity to present an unrecognized tax benefit relating to a net operating loss carryforward, a similar tax loss or a tax credit
carryforward as a reduction to a deferred tax asset except in certain situations. To the extent the net operating loss carry forward,
similar tax loss or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to
settle any additional income taxes that would result from the disallowance of the tax position or the tax law of the applicable
jurisdiction does not require the entity to use and the entity does not intend to use the deferred tax asset for such purpose, the
unrecognized tax benefit should be presented as a liability. ASU No. 2013-11 is effective for fiscal years, and interim periods
within those years, beginning on or after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material
impact on the Company's financial condition or results of operations.
During February 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-03, "Reporting of Amounts Reclassified
Out of Accumulated Other Comprehensive Income." ASU 2013-03 requires an entity to provide information about the amounts
reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on
the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other
comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP
to be reclassified to net income in its entirety in the same reporting period. ASU is effective prospectively for reporting periods
beginning after December 15, 2012. The adoption of ASU 2013-03 did not have a material impact on the Company's financial
condition or results of operations.
F-16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations
A. Acquisition and Disposition of Properties
Acquisitions
During 2013, the Company acquired the following properties through its Core Portfolio and Funds as follows:
Core Portfolio
(dollars in millions)
Property
GLA
Percent
Owned
Type
Month of
Acquisition
Purchase
Price
Location
664 N Michigan Avenue
18,141
100%
Street Retail March
$
86.6 Chicago, IL
8-12 East Walton
3200-3204 M Street
868 Broadway
313-315 Bowery
120 West Broadway (1)
Total
Note:
100%
100%
100%
100%
100%
Street Retail
Street Retail
June
July
Street Retail December
Street Retail December
Street Retail December
8,244
7,000
2,031
6,600
13,988
56,004
22.5 Chicago, IL
11.8 Washington, D.C.
13.5 New York, NY
5.5 New York, NY
37.0 New York, NY
$
176.9
(1) This acquisition was primarily funded with the issuance of 1.2 million OP Units.
The Company expensed $2.7 million of acquisition costs for the year ended December 31, 2013 related to the Core Portfolio.
Fund III
Fund III had previously acquired a $23.0 million note receivable at a discounted price of $18.5 million during April 2012. The
note receivable, which was scheduled to mature in May 2012, was collateralized by a 79,526 square foot shopping center located
in Brooklyn, New York ("Nostrand Place"). The Company commenced foreclosure proceedings, but ultimately agreed to a
settlement with the unaffiliated borrower. Pursuant to the settlement, in February 2013, Fund III and the borrower formed a joint
venture whereby Fund III contributed its interest in the note for a 99% controlling interest in the joint venture, and the borrower
contributed the deed to Nostrand Place in exchange for a 1% interest in the joint venture. As a result, Fund III consolidates its
investment in Nostrand Place.
The Company expensed $0.8 million of acquisition costs for the year ended December 31, 2013 related to Fund III.
F-17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations, continued
Fund IV
(dollars in millions)
Property
GLA
Percent
Owned Type
Month of
Acquisition
Purchase
Price
Location
2819 Kennedy Boulevard (1)
53,680
90% Shopping Center
June
$
North Bergen,
NJ
9.0
Promenade at Manassas (1)
Paramus Plaza
1151 Third Avenue
Lake Montclair
938 W North Avenue
Total
Note:
265,442
152,118
12,288
105,850
35,000
624,378
90% Shopping Center
July
38.0 Manassas, VA
50% Shopping Center
September
18.9 Paramus, NJ
100% Street Retail
100% Shopping Center
October
October
18.0 New York, NY
19.3 Dumfries, VA
80% Street Retail
November
20.0 Chicago, IL
$
123.2
(1) As the joint venture partners to these investments maintain operating control over the investments, these are accounted for
under the equity method.
The Company expensed $2.0 million of acquisition costs for the year ended December 31, 2013 related to Fund IV.
The above acquisitions have been accounted for as business combinations. The purchase prices were allocated to the acquired
assets and assumed liabilities based on the Company's current best estimate of fair value of these acquired assets and assumed
liabilities at the dates of acquisition. The preliminary measurements of fair value reflected below are subject to change. The
Company expects to finalize the valuations and complete the purchase price allocations within one year from the dates of acquisition.
The following table summarizes both the Company's preliminary allocations of the purchase prices of assets acquired and liabilities
assumed during 2013:
(dollars in thousands)
Land
Buildings and Improvements
Total Consideration
Preliminary
Purchase Price
Allocation
$
$
65,829
253,724
319,553
During 2012, the Company acquired properties and recorded the preliminary allocation of the purchase price to the assets acquired
based on provisional measurements of fair value. During 2013, the Company finalized the allocation of the purchase price and
made certain measurement period adjustments. The following table summarizes the preliminary allocation of the purchase price
of properties as recorded as of December 31, 2012, and the finalized allocation of the purchase price as adjusted as of December
31, 2013:
F-18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations, continued
(dollars in thousands)
Land
Buildings and Improvements
Preliminary
Purchase Price
Allocation
Adjustments
Finalized
Purchase Price
Allocation
$
86,826 $
226,650
30,312 $
(32,440)
117,138
194,210
Acquisition-related intangible assets (in Acquired lease
intangibles, net)
Acquisition-related intangible liabilities (in Acquired
lease intangibles, net)
Above-below market debt assumed (included in
Mortgages and other notes payable)
—
—
—
Total Consideration
$
313,476 $
31,965
31,965
(27,592)
(27,592)
(2,245)
— $
(2,245)
313,476
Dispositions
During 2013, the Company disposed of the following properties:
Core Portfolio
During 2013, the Company sold the A&P Shopping Center, a 62,741 square foot center, anchored by an A&P supermarket, located
in Boonton, New Jersey, for $18.4 million, which resulted in a gain of $6.5 million.
Fund II
(dollars in thousands)
Property
Pelham Storage
Fordham Place
Pelham Plaza
Total
B. Discontinued Operations
Month
Sold
May
November
November
$
$
Sales Price
Gain/(Loss)
GLA
11,900
133,900
58,500
204,300
$
$
4,226
(806)
8,894
12,314
490,900
262,407
228,493
981,800
The Company reports properties sold and held-for-sale during the periods as discontinued operations. The assets and liabilities
and results of operations of discontinued operations are reflected as a separate component within the accompanying consolidated
financial statements for all periods presented.
The combined assets and liabilities as of December 31, 2013 and 2012, and the results of operations of the properties classified
as discontinued operations for the years ended December 31, 2013, 2012 and 2011, are summarized as follows:
F-19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition and Disposition of Properties and Discontinued Operations, continued
(dollars in thousands)
BALANCE SHEETS
ASSETS
Net real estate
Rents receivable, net
Deferred charges, net
Prepaid expenses and other assets
Total assets of discontinued operations
LIABILITIES
Mortgages payable
Accounts payable and accrued expenses
Other liabilities
Total liabilities of discontinued operations
(dollars in thousands)
STATEMENTS OF INCOME
Total revenues
Total expenses
Operating income
Impairment of assets
Loss on debt extinguishment
Gain on sale of properties
Income from discontinued operations
$
Income from discontinued operations attributable to noncontrolling interests
Income from discontinued operations attributable to Common Shareholders
$
3. Segment Reporting
December 31,
2013
December 31,
2012
$
$
$
$
17,991 $
565
38
1,840
20,434 $
— $
1,473
1,034
2,507 $
210,633
10,484
8,531
8,629
238,277
124,005
4,735
7,416
136,156
Years ended December 31,
2012
2011
2013
$
$
20,920
14,102
6,818
(6,683)
(800)
18,802
56,902
44,895
12,007
—
(2,541)
71,203
57,613
48,680
8,933
(6,925)
—
46,830
18,137
(12,048)
6,089
$
80,669
(64,582)
16,087
$
48,838
(15,894)
32,944
The Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The accounting policies of the
segments are the same as those described in the summary of significant accounting policies. The Company evaluates property
performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments
in the Core Portfolio are typically held long-term. Given the contemplated finite life of the Funds, these investments are typically
held for shorter terms. Fees earned by the Company as the general partner or managing member of the Funds are eliminated in
the Company’s consolidated financial statements. The following table sets forth certain segment information for the Company,
reclassified for discontinued operations, as of and for the years ended December 31, 2013, 2012 and 2011 (does not include
unconsolidated affiliates or discontinued operations):
F-20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Segment Reporting, continued
2013
(dollars in thousands)
Revenues
Property operating expenses, other operating and real
estate taxes
General and administrative expenses
Depreciation and amortization
Operating Income
Equity in (losses) earnings of unconsolidated affiliates
Impairment of asset
Loss on debt extinguishment
Interest and other finance expense
Income tax benefit (provision)
Income from continuing operations
Discontinued operations
Operating income from discontinued operations
Impairment of asset
Loss on debt extinguishment
Gain on sale of properties
Income from discontinued operations
Net income
Noncontrolling interests
(Income) loss from continuing operations
Income from discontinued operations
Net income attributable to noncontrolling interests
Net income attributable to Common Shareholders
Real Estate at Cost
Total Assets
Acquisition of Real Estate
Investment in Redevelopment and Improvements
Core Portfolio
Funds
Structured
Financing
Total
$
110,355
$
46,131
$
11,800
$
168,286
(29,040)
(23,611)
(28,989)
28,715
(99)
(1,500)
(309)
(26,158)
131
780
535
—
(145)
6,488
6,878
7,658
(1,002)
(2,406)
(3,408)
4,250
1,059,257
1,012,553
143,616
10,611
$
$
$
$
$
(17,513)
(1,944)
(11,310)
15,364
12,481
—
(456)
(13,316)
(150)
13,923
6,283
(6,683)
(655)
12,314
11,259
25,182
8,525
(9,642)
(1,117)
24,065
759,796
1,105,264
76,425
96,272
$
$
$
$
$
$
$
$
$
$
—
—
—
11,800
—
—
—
—
—
11,800
—
—
—
—
—
11,800
—
—
—
11,800
$
(46,553)
(25,555)
(40,299)
55,879
12,382
(1,500)
(765)
(39,474)
(19)
26,503
6,818
(6,683)
(800)
18,802
18,137
44,640
7,523
(12,048)
(4,525)
40,115
— $
1,819,053
126,706
$
2,244,523
— $
— $
220,041
106,883
F-21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Segment Reporting, continued
2012
(dollars in thousands)
Revenues
Property operating expenses, other operating and
real estate taxes
General and administrative expenses
Reserve for notes receivable
Depreciation and amortization
Operating Income
Equity in earnings of unconsolidated affiliates
Gain on sale of unconsolidated affiliates
Impairment of unconsolidated affiliates
Loss on debt extinguishment
Gain on involuntary conversion of asset
Interest and other finance expense
Income tax (provision) benefit
(Loss) income from continuing operations
Discontinued operations
Operating income from discontinued operations
Loss on debt extinguishment
Gain on sale of properties
Income from discontinued operations
Net (loss) income
Noncontrolling interests
Loss from continuing operations
Income from discontinued operations
Net income attributable to noncontrolling interests
Net (loss) income attributable to Common
Shareholders
Real Estate at Cost
Total Assets
Acquisition of Real Estate
Investment in Redevelopment and Improvements
Core Portfolio
Funds
Structured
Financing
Total
$
70,400
$
36,560
$
8,027
$
114,987
(21,817)
(19,573)
—
(17,065)
11,945
262
—
—
—
2,368
(15,431)
(241)
(1,097)
319
—
—
319
(778)
60
(128)
(68)
(15,899)
(1,650)
—
(10,823)
8,188
288
3,061
(2,032)
(198)
—
(7,380)
815
2,742
11,688
(2,541)
71,203
80,350
83,092
14,292
(64,454)
(50,162)
—
—
(405)
—
7,622
—
—
—
—
—
—
—
7,622
—
—
—
—
7,622
—
—
—
(37,716)
(21,223)
(405)
(27,888)
27,755
550
3,061
(2,032)
(198)
2,368
(22,811)
574
9,267
12,007
(2,541)
71,203
80,669
89,936
14,352
(64,582)
(50,230)
$
$
$
$
$
(846) $
32,930
722,345
727,423
175,556
3,862
$
$
$
$
564,853
811,855
66,338
78,265
$
$
$
$
$
7,622
$
39,706
— $
1,287,198
130,885
$
1,670,163
— $
— $
241,894
82,127
F-22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Segment Reporting, continued
2011
(dollars in thousands)
Revenues
Property operating expenses, other operating and
real estate taxes
General and administrative expenses
Depreciation and amortization
Operating Income
Equity in earnings of unconsolidated affiliates
Gain on debt extinguishment
Interest and other finance expense
Income tax (provision) benefit
(Loss) income from continuing operations
Discontinued operations
Operating income from discontinued operations
Impairment of asset
Gain on sale of properties
Income from discontinued operations
Net income
Noncontrolling interests
(Income) loss from continuing operations
Income from discontinued operations
Net income attributable to noncontrolling interests
Net income attributable to Common Shareholders
Real Estate at Cost
Total Assets
Acquisition of Real Estate
Investment in Redevelopment and Improvements
Core Portfolio
Funds
Structured
Financing
Total
$
58,162
$
27,990
$
11,705
$
97,857
(16,433)
(20,950)
(13,070)
7,709
644
1,268
(16,480)
(1,073)
(7,932)
626
—
28,576
29,202
21,270
(575)
(49)
(624)
20,646
475,685
487,469
56,103
12,266
$
$
$
$
$
(11,595)
(2,046)
(7,905)
6,444
911
—
(6,863)
612
1,104
8,307
(6,925)
18,254
19,636
20,740
14,309
(15,845)
(1,536)
19,204
421,685
530,236
60,305
49,045
$
$
$
$
$
$
$
$
$
$
—
—
—
11,705
—
—
—
—
11,705
—
—
—
—
11,705
—
—
—
11,705
$
(28,028)
(22,996)
(20,975)
25,858
1,555
1,268
(23,343)
(461)
4,877
8,933
(6,925)
46,830
48,838
53,715
13,734
(15,894)
(2,160)
51,555
— $
897,370
59,989
$
1,077,694
— $
— $
116,408
61,311
F-23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments In and Advances to Unconsolidated Affiliates
Core Portfolio
The Company owns a 49% interest in a 311,000 square foot shopping center located in White Plains, New York ("Crossroads"),
a 50% interest in an approximately 28,000 square foot retail portfolio located in Georgetown, Washington D.C. (the "Georgetown
Portfolio") and a 22.22% interest in an approximately 20,000 square foot retail property located in Wilmington, Delaware ("Route
202 Shopping Center"). As our joint venture partners in these investments maintain operating control, these are accounted for
under the equity method.
Funds
Fund Investments
During 2013, Fund II, through a joint venture ("City Point Tower I") with an unaffiliated entity, executed an agreement to acquire
the development rights for one of the residential components of Fund II's City Point project. Fund II contributed $1.1 million of
cash and $6.8 million of prepaid ground rent and previously incurred construction costs into this joint venture.
The unaffiliated partners for Fund II's investment in City Point Tower I, Fund III's investments in the Lincoln Road Portfolio,
Parkway Crossing, Arundel Plaza and the White City Shopping Center as well as Fund IV's investments in the Lincoln Road
Portfolio, 1701 Belmont Avenue, 2819 Kennedy Boulevard and Promenade at Manassas maintain control over these entities. The
Company accounts for these investments under the equity method as it has the ability to exercise significant influence, but does
not have any rights with respect to financial or operating control.
Self-Storage Management, a Fund III investment, was determined to be a variable interest entity. Management has evaluated the
applicability of ASC Topic 810 to this joint venture and determined that the Company is not the primary beneficiary and, therefore,
consolidation of this venture is not required. The Company accounts for this investment using the equity method of accounting.
RCP Venture
The Funds, together with two unaffiliated partners formed an investment group, the RCP Venture, for the purpose of making
investments in surplus or underutilized properties owned by retailers and, in some instances, the retailers' operating company. The
RCP Venture is neither a single entity nor a specific investment and the Company has no control or rights with respect to the
formation and operation of these investments. The Company has made these investments through its subsidiaries, Mervyns I,
Mervyns II and Fund II, (together the "Acadia Investors"), all on a non-recourse basis. Through December 31, 2013, the Acadia
Investors have made investments in Mervyns Department Stores ("Mervyns") and Albertsons including additional investments in
locations that are separate from these original investments ("Add-On Investments"). Additionally, they have invested in Shopko,
Marsh and Rex Stores Corporation (collectively "Other RCP Investments"). The Company accounts for its investments in Mervyns
and Albertsons on the equity method as it has the ability to exercise significant influence, but does not have any rights with respect
to financial or operating control. The Company accounts for its investments in its Add-On Investments and Other RCP Investments
on the cost method as it does not have any influence over such entities' operating and financial policies nor any rights with respect
to the control and operation of these entities.
F-24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments In and Advances to Unconsolidated Affiliates, continued
The following table summarizes activity related to the RCP Venture investments from inception through December 31, 2013:
Investment
Mervyns
Mervyns Add-On investments
Albertsons
Albertsons Add-On investments
Shopko
Marsh and Add-On investments
Rex Stores
Total
Operating Partnership Share
Invested
Capital
and
Advances
$
$
26,058
7,547
20,717
2,416
1,108
2,667
2,701
63,214
Invested
Capital
and
Advances
4,901
1,252
4,239
388
222
533
535
12,070
Distributions
46,916
$
5,334
81,594
4,864
2,460
2,639
1,956
145,763
$
$
$
Distributions
11,451
$
1,193
16,318
972
492
528
392
31,346
$
Year
Acquired
2004
2005/2008
2006
2006/2007
2006
2006/2008
2007
The Company accounts for the original investments in Mervyns and Albertson’s under the equity method of accounting as the
Company has the ability to exercise significant influence, but does not have financial or operating control.
The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership
interest, based on the size of the investments as well as the terms of the underlying operating agreements, the Company has no
influence over such entities' operating and financial policies. Other than the minority investor rights to which the Company is
entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers
of the Add-On Investments and Other RCP Investments. The Company has no rights with respect to the control and operation of
these investment vehicles, nor with the formulation and execution of business and investment policies.
The Acadia Investors have non-controlling interests in the individual investee LLC’s as follows:
Acadia Investors
Ownership % in:
Investment
Mervyns
Mervyns Add-On Investments
Albertsons
Albertsons Add-On Investments
Shopko
Marsh and Add-On Investments
Rex Stores
Investee LLC
KLA/Mervyn's, L.L.C
KLA/Mervyn's, L.L.C
KLA A Markets, LLC
KLA A Markets, LLC
KA-Shopko, LLC
KA Marsh, LLC
KLAC Rex Venture, LLC
Acadia Investors
Entity
Mervyns I and Mervyns II
Mervyns I and Mervyns II
Mervyns II
Mervyns II
Fund II
Fund II
Mervyns II
Investee
LLC
10.5%
10.5%
18.9%
20.0%
20.0%
20.0%
13.3%
Underlying
entity(s)
5.8%
5.8%
5.7%
6.0%
2.0%
3.3%
13.3%
F-25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments In and Advances to Unconsolidated Affiliates, continued
Summary of Investments in Unconsolidated Affiliates
The following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial
information of the Company’s investments in unconsolidated affiliates.
(dollars in thousands)
Combined and Condensed Balance Sheets
Assets:
Rental property, net
Real estate under development
Investment in unconsolidated affiliates
Other assets
Total assets
Liabilities and partners’ equity:
Mortgage notes payable
Other liabilities
Partners’ equity
Total liabilities and partners’ equity
Company’s investment in and advances to unconsolidated affiliates
Company's share of distributions in excess of share of income and
investments in unconsolidated affiliates
December 31,
2013
December 31,
2012
$
$
$
$
$
$
380,268
5,573
63,745
66,895
516,481
265,982
43,733
206,766
516,481
181,322
$
$
$
$
$
441,611
—
93,923
39,035
574,569
326,296
24,267
224,006
574,569
221,904
(8,701) $
(22,707)
F-26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments In and Advances to Unconsolidated Affiliates, continued
(dollars in thousands)
Combined and Condensed Statements of Income
Total revenues
Operating and other expenses
Interest expense
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Loss on debt extinguishment
Gain on sale of properties
Net income
Company’s share of net income
Amortization of excess investment
Company’s equity in earnings of unconsolidated affiliates
Years Ended December 31,
2012
2011
2013
$
$
$
$
$
$
$
51,638
(18,700)
(8,943)
13,651
(10,599)
—
—
27,047
12,774
(392)
$
$
$
49,729
(18,919)
(18,547)
583
(9,551)
(293)
3,402
6,404
1,971
(392)
42,185
(15,924)
(17,099)
7,243
(8,837)
—
—
7,568
1,946
(391)
12,382
$
1,579
$
1,555
5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments
During 2013, the Company made total investments in notes receivable and preferred equity investments of $45.0 million and total
collections of $29.6 million.
The following table reconciles notes receivable investments from January 1, 2011 to December 31, 2013:
(dollars in thousands)
Beginning Balance
Additions during period:
New investments
Deductions during period:
Collections of principal
Conversion to real estate through receipt of deed
or through foreclosure
Reclass to investments in unconsolidated affiliates
Non-cash accretion of notes receivable
Reserves
Ending Balance
For the years ended December 31,
2012
59,989
2013
$ 129,278
2011
89,202
$
$
45,000
108,629
34,758
(29,583)
(25,388)
(56,517)
(18,500)
—
461
—
$ 126,656
(14,000)
—
453
(405)
$ 129,278
$
—
(8,000)
786
(240)
59,989
As of December 31, 2013, the Company’s notes receivable, net, approximated $126.7 million and were collateralized by the
underlying properties, the borrower’s ownership interest in the entities that own the properties and/or by the borrower’s personal
guarantee. Notes receivable were as follows at December 31, 2013:
F-27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continued
Note Description
(dollars in thousands)
First Mortgage Loan
First Mortgage Loan
Zero Coupon Loan 2
Preferred Equity
Mezzanine Loan
First Mortgage Loan
Mezzanine Loan 3
First Mortgage Loan
Mezzanine Loan 4
Construction Loan
First Mortgage Loan
Effective
interest rate
(1)
First
Priority
Liens
Net Carrying
Amount of Notes
Receivable as of
December 31, 2013
Net Carrying
Amount of Notes
Receivable as of
December 31, 2012
Maturity
Date
Extension
Options
5.5%
7.7%
24.0%
8.1%
15.0%
8.0%
10.0%
5.3%
15.0%
20.5%
12.0%
$
— $
—
166,200
20,855
—
—
$
42,000
12,000
4,431
13,000
30,879
6,400
25,000
3,961
1/31/2014
— 1/1/2015
1/3/2016
— 9/1/2017
11/9/2020
Demand
30,879
8,000
89,566
—
16,668
—
—
—
9,089
—
3,834
—
—
—
9,089
18,500
Demand
Demand
Upon
Capital
Event
12/31/2012
12/1/2013
3,834
5,400
12,333
10,250
12/31/2013
37,623
5,023
$
126,656
$
2,032
129,278
12/31/2014
to Capital
Event
—
—
—
—
—
—
—
—
—
—
—
—
—
First Mortgage Loan
6.0%
2.5% +
LIBOR to
17.5%
Individually less than
3% 5
Total
Notes:
(1) The effective interest rate includes origination and exit fees.
(2) The principal balance for this accrual only loan is increased by the interest accrued
(3) Comprised of three cross-collateralized loans from one borrower, which are non-performing
(4) Non-performing loan
(5) Consists of four loans, two of which are non-performing, with an aggregate face value of $5.7 million, of which $3.7 million
has been reserved
During January 2013, Fund III received a payment of $2.5 million, representing the full principal and interest on a note that had
been previously written off. This has been recognized as other income in the consolidated statement of income.
During February 2013, Fund III, in conjunction with its acquisition of Nostrand Place (Note 2), received repayment on $13.0
million of its first mortgage loan of $18.5 million and contributed the remaining unliquidated balance to a joint venture.
During March 2013, the Company received a payment of $5.4 million, representing full payment on a construction loan.
During September 2013, the Company received a payment of $10.3 million, representing full payment of principal and accrued
interest on a first mortgage loan that was scheduled to mature on December 31, 2013.
During November 2013, Fund I received payment of $12.5 million representing the remaining $12.2 million of principal on its
note related to the sale of the Kroger/Safeway portfolio and $0.3 million of interest.
F-28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continued
During December 2013, the Company received a $1.6 million payment on an $8.0 million note representing the release price
on one of the three properties on which the note was collateralized. The balance of $6.4 million remains outstanding.
During December 2013, the Company made a preferred equity investment in a joint venture for $13.0 million. The joint venture
owns a property and the agreement provides the Company with the first right of offer to purchase the property should the Members
decide to sell. The investment has a mandatory redemption date of September 1, 2017 and earns a preferred return rate of 8.1%.
During December 2013, the Company made a $12.0 million loan, which is collateralized by a property located in Manhattan. The
loan bears interest at 7.7% and matures January 1, 2015.
During December 2013, the Company amended a $25.0 million loan which bore interest at 9.0% and was set to mature January
1, 2014. The amended note increased the principal amount to $42.0 million and adjusted the interest rate to 5.5%. The amended
note matured on January 31, 2014. This note is collateralized by a property which is currently under contract to acquire.
During December 2013, the Company made a $3.0 million loan in conjunction with the acquisition of a long term master lease
for a property located in Manhattan. The loan is collateralized by operating partnership units given to the buyer as part of the
purchase price. The loan bears interest at LIBOR plus 2.5% and matures December 2020.
The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality
such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company's loan in relation
to other debt secured by the collateral and the prospects of the borrower. As of December 31, 2013, the Company held six non-
performing notes aggregating $18.6 million for which payment was delinquent. Based primarily on the indicators noted above,
the Company has established a reserve of $3.7 million as of December 31, 2013 related to these notes.
The following table reconciles the activity in the allowance for notes receivable from December 31, 2011 to December 31, 2013:
(dollars in thousands)
Balance at December 31, 2011
Additional reserves
Recoveries
Charge-offs and reclassifications
Balance at December 31, 2012
Additional reserves
Recoveries
Charge-offs and reclassifications
Balance at December 31, 2013
Allowance for
Notes Receivable
$
$
$
3,276
405
—
—
3,681
—
—
—
3,681
F-29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Deferred Charges
Deferred charges consist of the following as of December 31, 2013 and 2012:
(dollars in thousands)
Deferred financing costs
Deferred leasing and other costs
Accumulated amortization
Total
7. Acquired Lease Intangibles
$
December 31,
2013
36,481
33,664
70,145
(39,370)
$
2012
24,235
23,903
48,138
(29,280)
$
30,775
$
18,858
Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements,
and identified intangibles such as above and below market leases, including below market options, acquired in-place leases and
customer relationships) and assumed liabilities in accordance with ASC Topic 805. The lease intangibles are amortized over the
remaining terms of the respective leases, including option periods where applicable.
The scheduled amortization of acquired lease intangible assets and assumed liabilities as of December 31, 2013 is as follows:
(dollars in thousands)
Acquired lease intangible
Assets
Liabilities
2014
2015
2016
2017
2018
Thereafter
Total
$
$
5,242
4,857
4,492
3,335
2,991
12,746
33,663
$
$
3,586
3,406
3,233
2,591
1,964
7,614
22,394
F-30
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Mortgage and Other Notes Payable
At December 31, 2013 and 2012, mortgage and other notes payable, excluding the net valuation premium on the assumption of
debt, aggregated $1,037.7 million and $612.4 million respectively, and were collateralized by 32 properties and related tenant
leases. Interest rates on the Company’s outstanding mortgage indebtedness ranged from 1.00% to 7.25% with maturities that
ranged from April 2014 to April 2023. Certain loans are cross-collateralized and contain cross-default provisions. The loan
agreements contain customary representations, covenants and events of default. Certain loan agreements require the Company to
comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios.
The following table reflects mortgage loan activity for the year ended December 31, 2013:
(dollars in thousands)
Collateral
Activity
Month
Amount
Borrowed or
Assumed
Amount
Repaid
Interest Rate
Maturity
Date
28 Jericho Turnpike
New Loan
January
$
16,500 $
— LIBOR + 1.90% 1/23/2023
Nostrand Ave
161st St
City Point (1)
60 Orange St
210 Bowery
New Loan
February
Refinance
March
Amendment March
New Loan
New Loan
April
June
Cortlandt Towne Center (2) Amendment August
Village Commons Shopping
Center
Branch Plaza
West Diversey
Fordham Place (3)
Pelham Manor (3)
Repayment November
Repayment November
Repayment November
Repayment December
Repayment December
Lincoln Park Center
Refinance
December
A&P Shopping Plaza (3)
Repayment December
City Point
Total
Notes:
New Loan
December
13,000
29,500
20,000
8,600
4,600
12,033
—
—
—
—
23,000
—
197,000
— LIBOR + 2.65%
2/1/2016
28,900 LIBOR + 2.50%
4/1/2018
— LIBOR + 5.00% 8/23/2015
— LIBOR + 1.75%
4/3/2023
— LIBOR + 1.95%
6/1/2014
— LIBOR + 1.65% 10/26/2015
9,084
12,311
14,905
81,422
33,555
19,026 LIBOR + 1.45% 12/3/2016
8,000
—
4.75%
2019 (4)
$
324,233 $
207,203
(1) Loan was amended from $50.0 million to $20.0 million.
(2) Loan was amended from $73.0 million to $85.0 million.
(3) Loan was paid off in connection with the sale of the property.
(4) The maturity date of this loan is five years after the final advancing of funds which is currently anticipated to occur by the end
of 2014.
F-31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Mortgage and Other Notes Payable, continued
The following table sets forth certain information pertaining to our credit facilities as of December 31, 2013:
(dollars in thousands)
Borrower
Acadia Realty, LP
Fund IV
Total
Total amount
of credit
facility
Amount
borrowed
as of
December 31,
2012
Net borrowings
(repayments)
during the year
ended
December 31, 2013
Amount
borrowed as
of December
31, 2013
$
$
150,000
150,000
300,000
$
$
— $
93,050
93,050
$
— $
— $
68,750
Letters
of credit
outstanding
as of
December 31,
2013
12,500
—
Amount available
under credit
facilities
as of
December 31, 2013
137,500
$
81,250
68,750
$
12,500
$
218,750
(24,300)
(24,300) $
F-32
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Mortgage and Other Notes Payable, continued
The following table summarizes the Company’s mortgage and other secured indebtedness as of December 31, 2013 and
December 31, 2012:
(dollars in thousands)
Description of Debt and Collateral
12/31/2013
12/31/2012
Mortgage notes payable – variable-rate
161st Street
Liberty Avenue
210 Bowery
$
— $
28,900
9,090
4,600
9,208
—
Branch Shopping Plaza
—
12,526
640 Broadway
Heritage Shops
CityPoint
CityPoint
22,750
22,750
20,871
21,000
20,650
20,650
20,000
—
Cortlandt Towne Center
84,745
73,499
New Hyde Park Shopping Center
6,294
6,484
Nostrand Ave
12,567
—
Village Commons Shopping Center
—
9,192
Lincoln Park Centre
Term Loan
161st Street
West Diversey
23,000
50,000
29,500
—
—
—
—
15,273
4401 N White Plains Road
6,263
6,381
28 Jericho Turnpike
60 Orange Street
Sub-total mortgage notes payable
Credit facilities – variable-rate:
Fund IV revolving subscription line of
credit (2)
Interest rate swaps (1)
Total variable-rate debt
16,164
8,457
334,951
—
—
225,863
68,750
93,050
(179,660)
(132,857)
224,041
186,056
Interest Rate at
December 31, 2013
Maturity
Payment
Terms
5.67%
(LIBOR+5.50%)
3.42%
(LIBOR+3.25%)
2.12%
(LIBOR+1.95%)
2.42%
(LIBOR+2.25%)
3.12%
(LIBOR+2.95%)
2.42%
(LIBOR+2.25%)
3.67%
(LIBOR+3.50%)
5.17%
(LIBOR+5.00%)
1.82%
(LIBOR+1.65%)
2.42%
(LIBOR+2.25%)
2.82%
(LIBOR+2.65%)
1.57%
(LIBOR+1.40%)
1.62%
(LIBOR+1.45%)
1.57%
(LIBOR+140%)
2.67%
(LIBOR+2.50%)
2.07%
(LIBOR+1.90%)
2.07%
(LIBOR+1.90%)
2.07%
(LIBOR+1.90%)
1.92%
(LIBOR+1.75%)
4/1/2013
Interest only monthly.
4/30/2014 Monthly principal and interest.
6/1/2014
Interest only monthly.
9/30/2014 Monthly principal and interest.
7/1/2015
Interest only monthly.
8/10/2015
Interest only monthly.
8/12/2015
Interest only monthly.
8/23/2015
Interest only monthly.
10/26/2015 Monthly principal and interest.
11/10/2015 Monthly principal and interest.
2/1/2016
Monthly principal and interest.
6/30/2018 Monthly principal and interest.
12/3/2016
Interest only monthly.
11/25/2018
Interest only monthly.
4/1/2018
Interest only monthly.
4/27/2019 Monthly principal and interest.
9/1/2022
Monthly principal and interest.
1/23/2023 Monthly principal and interest.
4/3/2023
Monthly principal and interest.
1.82%
(LIBOR+1.65%)
11/20/2015
Interest only monthly.
F-33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Mortgage and Other Notes Payable, continued
(dollars in thousands)
Description of Debt and Collateral
12/31/2013
12/31/2012
Interest Rate at
December 31, 2013
Maturity
Payment
Terms
Mortgage notes payable – fixed-rate
Lincoln Park Centre
Clark Diversey
New Loudon Center
CityPoint
Crescent Plaza
Pacesetter Park Shopping Center
Elmwood Park Shopping Center
Chicago Street Retail Portfolio
The Gateway Shopping Center
330-340 River Street
Brandywine Town Center
Walnut Hill Plaza
Rhode Island Place Shopping Center
239 Greenwich Avenue
639 West Diversey
Merrillville Plaza
216th Street
CityPoint
CityPoint
Interest rate swaps (1)
Total fixed-rate debt
Unamortized premium (discount)
Total
Notes:
$
— $
19,478
4,192
13,369
20,000
16,747
11,530
32,744
15,558
19,746
10,904
166,200
22,910
16,208
26,000
4,341
25,837
25,500
5,262
197,000
179,660
813,708
1,868
4,345
13,634
20,000
17,025
11,742
33,258
15,835
20,036
11,128
—
23,194
16,426
26,000
4,431
26,151
25,500
5,262
—
132,857
426,302
(107)
$ 1,039,617
$
612,251
5.85%
6.35%
5.64%
7.25%
4.98%
5.12%
5.53%
5.61%
5.44%
5.29%
5.99%
6.06%
6.35%
5.42%
6.65%
5.88%
5.80%
1.00%
4.75%
2.15%
12/1/2013 Monthly principal and interest.
7/1/2014
Monthly principal and interest.
9/6/2014
Monthly principal and interest.
11/1/2014
Interest only quarterly.
9/6/2015
Monthly principal and interest.
11/6/2015 Monthly principal and interest.
1/1/2016
Monthly principal and interest.
2/1/2016
3/1/2016
5/1/2016
7/1/2016
Monthly principal and interest.
Monthly principal and interest.
Monthly principal and interest.
Interest only monthly.
10/1/2016 Monthly principal and interest.
12/1/2016 Monthly principal and interest.
2/11/2017
Interest only monthly.
3/1/2017
Monthly principal and interest.
8/1/2017
Monthly principal and interest.
10/1/2017
Interest only monthly.
8/23/2019
Interest only monthly.
2019 (3)
Interest only monthly.
(1) Represents the amount of the Company’s variable-rate debt that has been fixed through certain cash flow hedge transactions
(Note 10).
(2) The Fund IV revolving subscription line of credit is secured by unfunded investor capital commitments.
(3) The maturity date of this loan is five years after the final advancing of funds which is currently anticipated to occur by the
end of 2014.
The scheduled principal repayments of all indebtedness, including Convertible Notes (Note 9), as of December 31, 2013 are as
follows (does not include $1,868 net valuation discount on assumption of debt):
(dollars in thousands)
2014
2015
2016
2017
2018
Thereafter
$
57,083
273,909
316,540
81,161
80,382
229,054
$ 1,038,129
F-34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Convertible Notes Payable
In December 2006 and January 2007, the Company issued a total of $115.0 million of convertible notes with a fixed interest rate
of 3.75% due 2026 (the "Convertible Notes"). The Convertible Notes were issued at par and require interest payments semi-
annually in arrears on June 15 and December 15 of each year. The Convertible Notes are unsecured, unsubordinated obligations
and rank equally with all other unsecured and unsubordinated indebtedness. The Convertible Notes were accounted for under ASC
Topic 470-20, “Debt with Conversion and Other Options,” which required the Company to allocate the proceeds from the issuance
between a debt component and an equity component. The resulting discount on the debt component was amortized over the period
the convertible debt was expected to be outstanding, which was December 11, 2006 to December 20, 2011, as additional non-cash
interest expense. Until December 20, 2011, the Convertible Notes had an effective interest rate of 6.03% after giving effect to
ASC Topic 470-20. The additional non-cash interest expense recognized in the Consolidated Statements of Income was $0.8
million for the year ended December 31, 2011.
As of December 31, 2013, $114.6 million of the Convertible Notes have been repurchased. The remaining Convertible Notes bear
interest at 3.75% and the Company has the right to redeem the notes, in whole, or in part, at any time, and from time to time, for
cash equal to 100% of the principal amount of the notes plus any accrued and unpaid interest to, but not including, the redemption
date. The Holders of notes may require the Company to repurchase their notes, in whole or in part, on December 15, 2016 and
December 15, 2021 for cash equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid
interest to, but not including, the repurchase date.
10. Financial Instruments and Fair Value Measurements
The FASB’s fair value measurements and disclosure guidance requires the valuation of certain of the Company’s financial assets
and liabilities, based on a three-level fair value hierarchy. Market participant assumptions obtained from sources independent of
the Company are observable inputs that are classified within Levels 1 and 2 of the hierarchy, and the Company’s own assumptions
about market participant assumptions are unobservable inputs classified within Level 3 of the hierarchy.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring
basis as of December 31, 2013:
(dollars in thousands)
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
Level 1
Level 2
Level 3
$
$
— $
3,114
— $
2,066
$
$
—
—
During the year ended December 31, 2011, the Company determined that the value of the Granville Centre owned by Fund I was
impaired and recorded an impairment loss of $6.9 million (Note 1). The Company estimated the property's fair value by using
projected future cash flows, which it determined were not sufficient to recover the property's net book value. The inputs used to
determine the fair value of the Granville Centre were classified as Level 3 under authoritative guidance for fair value measurements.
During the year ended December 31, 2012, the Company determined that carrying value in its investment in Mervyns was impaired
and recorded an impairment of $2.0 million (Note 1). The analysis performed consisted of discounted cash flows which were
used to determine the fair value of the Mervyns investment and were classified as Level 3 under authoritative guidance for fair
value measurements.
During the year ended December 31, 2013, the Company determined that the value of the Walnut Hill Plaza was impaired and
recorded an impairment loss of $1.5 million (Note 1). The Company estimated the fair value by using projected future cash flows,
which it determined were not sufficient to recover the property's net book value. The inputs used to determine this fair value are
classified within Level 3 under authoritative guidance for fair value measurements.
During the year ended December 31, 2013, the Company entered into a firm contract to sell Sheepshead Bay for $20.2 million.
As this amount is less than the carrying cost, the Company recorded an impairment loss of $6.7 million (Note 1).
F-35
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Financial Instruments and Fair Value Measurements, continued
Derivative Financial Instruments
The FASB’s derivative and hedging guidance establishes accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities. As required by the FASB guidance, the
Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives
depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in
the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered
fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecast
transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged
risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value
of the derivative is initially reported in other comprehensive (loss) income (outside of earnings) and subsequently reclassified to
earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is
recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes
in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated
hedged item or transaction. For derivatives not designated as hedges, changes in fair value would be recognized in earnings.
As of December 31, 2013, the Company’s derivative financial instruments consisted of 11 interest rate LIBOR swaps with an
aggregate notional value of $179.7 million, which fix interest at rates from 0.52% to 3.77%, and mature between May 2015 and
April 2023. The Company also has four derivative financial instruments with a notional value of $140.7 million which cap interest
rates ranging from 3.0% to 4.3% and mature between July 2015 and April 2018. The fair value of the derivative liability of these
instruments, which is included in other liabilities in the consolidated balance sheets, totaled $2.0 million and $4.4 million at
December 31, 2013 and 2012, respectively. The fair value of these derivative instruments, included in prepaid expenses and other
assets in the Consolidated Balance Sheets, totaled $3.1 million at December 31, 2013. The notional value does not represent
exposure to credit, interest rate or market risks.
These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate
mortgage debt. Such instruments are reported at the fair value reflected above. As of December 31, 2013 and 2012, unrealized
income and (losses) totaling $1.1 million and ($4.3 million), respectively, were reflected in accumulated other comprehensive
income (loss). It is estimated that approximately $2.4 million included in accumulated other comprehensive income related to
derivatives will be reclassified to interest expense in the 2014 results of operations.
As of December 31, 2013 and 2012, no derivatives were designated as fair value hedges or hedges of net investments in foreign
operations. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have
any derivatives that are not designated as hedges. As of December 31, 2013, none of the Company’s hedges were ineffective.
Financial Instruments
Certain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying
amounts of these financial instruments approximates their fair value due to the short-term nature of such accounts.
The Company has determined the estimated fair values of the following financial instruments within Level 2 of the hierarchy by
discounting future cash flows utilizing a discount rate equivalent to the rate at which similar financial instruments would be
originated at the reporting date:
(dollars in thousands)
Notes Receivable and Preferred Equity Investments
Mortgage Notes Payable and Convertible Notes Payable
December 31, 2013
December 31, 2012
Carrying
Amount
$
126,707
$ 1,039,997
Estimated
Fair
Value
$
126,707
$ 1,056,457
Carrying
Amount
$
$
129,278
613,181
Estimated
Fair
Value
129,278
620,583
$
$
F-36
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Shareholders’ Equity and Noncontrolling Interests
Common Shares
During the year ended December 31, 2013, 3,250 employee Restricted Shares were canceled to pay the employees’ income taxes
due on the value of the portion of their Restricted Shares that vested. During the year ended December 31, 2013, the Company
recognized accrued Common Share and Common OP Unit-based compensation totaling $7.3 million in connection with the vesting
of Restricted Shares and Units (Note 15).
During 2013, the Company issued approximately 3.0 million Common Shares from the ATM program generating net proceeds of
approximately $80.7 million.
During 2013, the Company issued approximately 1.2 million OP units to acquire real estate.
During 2012, the Company issued approximately 6.1 million Common Shares from the ATM program generating net proceeds of
approximately $140.8 million and completed a public share offering of approximately 3.5 million Common Shares generating net
proceeds of approximately $85.9 million.
During 2012, Kenneth Bernstein, President and CEO, converted 250,000 Common OP Units into Common Shares.
During November 2011, the Company issued 2.3 million Common Shares generating net proceeds of approximately $45.0 million.
Noncontrolling Interests
The following table summarizes the change in the noncontrolling interests since December 31, 2012:
Noncontrolling
Interests
in Operating
Partnership
Noncontrolling
Interests
in Partially-
Owned
Affiliates
(dollars in thousands)
Balance at December 31, 2012
Distributions declared of $0.86 per Common OP Unit
Net income for the period January 1 through December 31, 2013
Conversion of 92,514 OP Units to Common Shares by limited partners of the
Operating Partnership
Consolidation of previously unconsolidated investment
Issuance of OP Units to acquire real estate
Other comprehensive income - unrealized loss on valuation of swap agreements
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions and other reductions
Employee Long-term Incentive Plan Unit Awards
Balance at December 31, 2013
$
$
$
11,794
(1,664)
492
(1,548)
—
33,300
23
21
—
—
6,530
48,948
$
435,665
—
4,033
—
(33,949)
—
46
973
49,324
(87,688)
—
368,404
Noncontrolling interests in the Operating Partnership represents (i) the limited partners’ 1,457,467 and 284,097 Common OP Units
at December 31, 2013 and 2012, respectively, (ii) 188 Series A Preferred OP Units at both December 31, 2013 and 2012, with a
stated value of $1,000 per unit, which are entitled to a preferred quarterly distribution of the greater of (a) $22.50 (9% annually)
per Series A Preferred OP Unit or (b) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted
into a Common OP Unit and (iii) 1,368,086 and 1,109,727 LTIP units as of December 31, 2013 and December 31, 2012, respectively,
as discussed in Share Incentive Plan (Note 15).
F-37
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Shareholders’ Equity and Noncontrolling Interests, continued
Noncontrolling Interests, continued
Noncontrolling interests in partially-owned affiliates include third-party interests in Fund I, II, III and IV, and Mervyns I and II,
and five other entities.
The Series A Preferred OP Units were issued in 1999 in connection with the acquisition of a property. Through December 31,
2013, 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188
remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by
$7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of
$7.50 or the market price of the Common Shares as of the conversion date.
12. Related Party Transactions
The Company earned property management, construction development, legal and leasing fees from its investments in
unconsolidated partnerships totaling $0.1 million, $0.8 million and $1.0 million for the years ended December 31, 2013, 2012 and
2011, respectively.
Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $0.1 million for each of the years ended December 31,
2013, 2012 and 2011.
13. Tenant Leases
Space in the shopping centers and other retail properties is leased to various tenants under operating leases that usually grant
tenants renewal options and generally provide for additional rents based on certain operating expenses as well as tenants’ sales
volume.
Minimum future rentals to be received under non-cancelable leases for shopping centers and other retail properties as of
December 31, 2013 are summarized as follows:
(dollars in thousands)
2014
2015
2016
2017
2018
Thereafter
Total
$
$
117,181
110,496
102,842
93,394
82,012
455,331
961,256
During the years ended December 31, 2013, 2012 and 2011, no single tenant collectively accounted for more than 10% of the
Company’s total revenues.
F-38
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Lease Obligations
The Company leases land at eight of its shopping centers, which are accounted for as operating leases and generally provide the
Company with renewal options. Ground rent expense was $1.8 million, $1.7 million, and $0.7 million (including capitalized
ground rent at properties under redevelopment of $0.8 million, $0.8 million and ($0.2 million) for the years ended December 31,
2013, 2012 and 2011, respectively. The leases terminate at various dates between 2020 and 2066. These leases provide the Company
with options to renew for additional terms aggregating from 23 to 71 years. The Company leases space for its White Plains corporate
office for a term expiring in 2015. Office rent expense under this lease was $1.4 million, $1.4 million and $1.4 million for the
years ended December 31, 2013, 2012 and 2011, respectively. Future minimum rental payments required for leases having remaining
non-cancelable lease terms are as follows:
$
(dollars in thousands)
2014
2015
2016
2017
2018
Thereafter
Total
$
2,773
2,219
1,112
5,117
1,180
24,047
36,448
15. Share Incentive Plan
During 2012, the Company terminated the 1999 and 2003 Plans and adopted the Amended 2006 Plan. The Amended 2006 Plan
increased the authorization to issue options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and
employees by 1.9 million shares to 2.1 million shares. Options are granted by the Compensation Committee (the "Committee"),
which currently consists of three non-employee Trustees, and will not have an exercise price less than 100% of the fair market
value of the Common Shares and a term of greater than ten years at the grant date. Vesting of options is at the discretion of the
Committee. The Committee determines the restrictions placed on Awards, including the dividends or distributions thereon and the
term of such restrictions. The Committee also determines the award and vesting of the awards based on the attainment of specified
performance objectives of the Company within a specified performance period.
On February 22, 2013, the Company issued a total of 284,447 LTIP Units and 590 Restricted Share Units to officers of the Company
and 11,880 Restricted Share Units to other employees of the Company. Vesting with respect to these awards is generally recognized
ratably over the five annual anniversaries following the issuance date. Vesting with respect to 16% of the awards issued to officers
is also generally subject to achieving certain Company performance measures. LTIP Units are similar to Restricted Shares but
provide for a quarterly partnership distribution in a like amount as paid to Common OP Units. This distribution is paid on both
unvested and vested LTIP Units. The LTIP Units are convertible into Common OP Units and Common Shares upon vesting and
a revaluation of the book capital accounts.
These awards were measured at their fair value as if they were vested on the grant date. Fair value was established as the market
price of the Company's Common Shares as of the close of trading on the day preceding the grant date.
The total value of the above Restricted Share Units and LTIP Units as of the grant date was $7.9 million. The weighted average
fair value for Restricted Shares and LTIP Units granted for the years ended December 31, 2013, 2012 and 2011 were $26.40,
$22.31 and $19.08, respectively.
Total long-term incentive compensation expense, including the expense related to the above mentioned plans, was $7.3 million,
$3.6 million and $4.0 million for the years ended December 31, 2013, 2012 and 2011, respectively and is recorded in General and
Administrative on the consolidated statements of income.
F-39
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Share Incentive Plan, continued
On May 15, 2013, the Company issued 20,718 Restricted Shares to Trustees of the Company in connection with Trustee fees.
Vesting with respect to 10,950 of the Restricted Shares will be on the first anniversary of the date of issuance and 9,768 of the
Restricted Shares vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. The Restricted
Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged
until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted
Shares, but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Trustee
fee expense of $0.3 million for the year ended December 31, 2013 has been recognized in the accompanying consolidated statement
of income related to this issuance.
In 2009, the Company adopted the Long Term Investment Alignment Program (the "Program") pursuant to which the Company
may award units primarily to senior executives which would entitle them to receive up to 25% of any future Fund III Promote
when and if such Promote is ultimately realized. The Company has awarded all of the units under the Program, and these units
were determined to have no value at issuance or as of December 31, 2013. In accordance with ASC Topic 718, "Compensation -
Stock Compensation," compensation relating to these awards will be recorded based on the change in the estimated fair value at
each reporting period.
As of December 31, 2013, the Company had 92,086 options outstanding to officers and employees and 21,000 options outstanding
to non-employee Trustees of the Company all of which have vested. These options are for ten-year terms from the grant date and
vested in three equal annual installments, which began on their respective grant dates.
A summary of option activity under all option arrangements as of December 31, 2013 and 2012, and changes during the years
then ended, is presented below:
Options
Outstanding and exercisable at December 31, 2011
Granted
Exercised
Forfeited or Expired
Outstanding and exercisable at December 31, 2012
Granted
Exercised
Forfeited or Expired
Outstanding and exercisable at December 31, 2013
Shares
150,283
—
(12,636)
—
137,647
—
(23,815)
(746)
113,086
Weighted
Average
Exercise Price
18.33
$
—
14.23
—
18.71
—
15.96
20.65
19.28
$
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(dollars in
thousands)
3.5
—
—
—
2.6
—
—
—
3.5
$
$
272
—
137
—
877
—
211
—
628
The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was $0.2 million, $0.1
million and $0.02 million, respectively.
A summary of the status of the Company’s unvested Restricted Shares and LTIP Units as of December 31, 2013 and 2012 and
changes during the years then ended is presented below:
F-40
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Share Incentive Plan, continued
Unvested Restricted Shares and LTIP
Units
Unvested at December 31, 2011
Granted
Vested
Forfeited
Unvested at December 31, 2012
Granted
Vested
Forfeited
Unvested at December 31, 2013
Restricted
Shares
75,739
30,153
(43,819)
(1,157)
60,916
31,830
(28,179)
(830)
63,737
Weighted
Grant-Date
Fair Value
18.25
$
21.88
19.29
16.02
19.36
23.75
18.77
23.00
23.34
$
LTIP Units
838,898
281,714
(176,926)
—
943,686
290,912
(350,264)
—
884,334
Weighted
Grant-Date
Fair Value
17.85
$
21.99
16.92
—
19.27
26.69
19.51
—
21.62
$
As of December 31, 2013, there was $11.1 million of total unrecognized compensation cost related to unvested share-based
compensation arrangements granted under share incentive plans. That cost is expected to be recognized over a weighted-average
period of 2.4 years. The total fair value of Restricted Shares that vested during the years ended December 31, 2013, 2012 and 2011
was $0.5 million, $0.8 million and $2.2 million, respectively.
16. Employee Share Purchase and Deferred Share Plan
The Acadia Realty Trust Employee Share Purchase Plan (the "Purchase Plan"), allows eligible employees of the Company to
purchase Common Shares through payroll deductions. The Purchase Plan provides for employees to purchase Common Shares
on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day
of the quarter, whichever is lower. A participant may not purchase more the $25,000 in Common Shares per year. Compensation
expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with
respect to the applicable quarter. During 2013, 2012 and 2011, a total of 3,678, 3,829, and 4,886 Common Shares, respectively,
were purchased by employees under the Purchase Plan. Associated compensation expense of $0.01 million was recorded in 2013,
2012 and 2011.
During May of 2006, the Company adopted a Trustee Deferral and Distribution Election ("Trustee Deferral Plan"), under which
the participating Trustees have deferred compensation of $0.07 million for 2013 and $0.06 million for 2012 and 2011.
17. Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s
contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their
compensation, up to $17,500, for the year ended December 31, 2013. The Company contributed $0.3 million for each of the years
ended December 31, 2013 and 2012 and $0.2 million for the year ended December 31, 2011.
18. Dividends and Distributions Payable
On November 4, 2013, the Board of Trustees declared a cash dividend for the quarter ended December 31, 2013 of $0.23 per
Common Share, which was paid on January 15, 2014 to holders of record as of December 31, 2013.
F-41
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Federal Income Taxes
The Company has elected to qualify as a REIT in accordance with Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), and intends at all times to qualify as a REIT under the Code. To qualify as a REIT, the Company
must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least
90% of its annual REIT taxable income to its shareholders. As a REIT, the Company generally will not be subject to corporate
Federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined
under the Code. As the Company distributed sufficient taxable income for the years ended December 31, 2013, 2012 and 2011,
no U.S. Federal income or excise taxes were incurred. If the Company fails to qualify as a REIT in any taxable year, it will be
subject to Federal income taxes at the regular corporate rates (including any applicable alternative minimum tax) and may not be
able to qualify as a REIT for the four subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the
Company is subject to certain state and local taxes on its income and property and Federal income and excise taxes on any
undistributed taxable income. In addition, taxable income from non-REIT activities managed through the Company’s Taxable
REIT Subsidiaries ("TRS") is subject to Federal, state and local income taxes.
Characterization of Distributions:
The Company has determined that the cash distributed to the shareholders is characterized as follows for Federal income tax
purposes:
Ordinary income
Qualified dividend
Capital gain
Taxable REIT Subsidiaries
For the years ended December 31,
2011
2012
2013
87%
—%
13%
100%
63%
—%
37%
100%
75%
22%
3%
100%
Income taxes have been provided for using the liability method as required by ASC Topic 740, "Income Taxes." The Company’s
TRS income and provision for income taxes for the years ended December 31, 2013, 2012 and 2011 are summarized as follows:
(dollars in thousands)
TRS (loss) income before income taxes
Benefit (provision) for income taxes:
Federal
State and local
TRS net (loss) income before noncontrolling interests
Noncontrolling interests
TRS net (loss) income
2013
2012
2011
$
(2,225) $
(2,056) $
376
276
71
(1,878)
267
(1,611) $
592
147
(1,317)
702
(615) $
(222)
(59)
95
1,245
1,340
$
The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before
income taxes as follows (not adjusted for temporary book/tax differences):
F-42
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Federal Income Taxes, continued
(dollars in thousands)
Federal (benefit) provision at statutory tax rate
TRS state and local taxes, net of federal benefit
Tax effect of:
Permanent differences, net
Prior year overaccrual, net
Restricted stock vesting
Other
REIT state and local income and franchise taxes
Total provision (benefit) for income taxes
$
$
2013
2012
2011
(757) $
(117)
496
128
(2)
127
144
19
$
(699) $
(109)
809
(553)
(159)
(41)
178
(574) $
128
20
(279)
—
266
133
193
461
20. Earnings Per Common Share
Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted
average Common Shares outstanding. At December 31, 2013, the Company has unvested LTIP Units (Note 15) which provide for
non-forfeitable rights to dividend equivalent payments. Accordingly, these unvested LTIP Units are considered participating
securities and are included in the computation of basic earnings per Common Share pursuant to the two-class method.
Diluted earnings per Common Share reflects the potential dilution of the conversion of obligations and the assumed exercises of
securities including the effects of restricted share unit ("Restricted Share Units") and share option awards issued under the
Company’s Share Incentive Plans (Note 15). The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067
Common Shares would be anti-dilutive and therefore not included in the computation of diluted earnings per share for the years
ended December 2013, 2012 and 2011.
The effect of the conversion of Common OP Units is not reflected in the computation of basic and diluted earnings per share, as
they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same
basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed
conversion of these units would have no net impact on the determination of diluted earnings per share. The conversion of the
convertible notes payable (Note 9) is not included in the computation of basic and diluted earnings per share as such conversion,
based on the current market price of the Common Shares, would be settled with cash.
(dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations
Less: net income attributable to participating securities
Income from continuing operations net of income
attributable to participating securities
Denominator:
Weighted average shares for basic earnings per share
Effect of dilutive securities:
Employee share options
Denominator for diluted earnings per share
Basic earnings per Common Share from continuing
operations attributable to Common Shareholders
Diluted earnings per Common Share from continuing
operations attributable to Common Shareholders
Years ended December 31,
2012
2011
2013
$
34,026
581
33,445
$
23,619
458
23,161
18,611
381
18,230
54,919
45,854
40,697
38
54,957
40
45,894
0.61
0.61
$
$
0.51
0.51
$
$
18
40,715
0.45
0.45
$
$
$
F-43
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2013 and 2012 are as follows:
(amounts in thousands, except per share amounts)
Revenue
Income from continuing operations attributable to
Common Shareholders
Income from discontinued operations attributable to
Common Shareholders
Net income attributable to Common Shareholders
Net income attributable to Common Shareholders
per Common Share - basic:
Income from continuing operations
Income from discontinued operations
Net income per share
Net income attributable to Common Shareholders
per Common Share - diluted:
Income from continuing operations
Income from discontinued operations
Net income per share
Cash dividends declared per Common Share
(amounts in thousands, except per share amounts)
Revenue
Income from continuing operations attributable to
Common Shareholders
Income from discontinued operations attributable to
Common Shareholders
Net income attributable to Common Shareholders
Net income attributable to Common Shareholders
per Common Share - basic:
Income from continuing operations
Income from discontinued operations
Net income per share
Net income attributable to Common Shareholders
per Common Share - diluted:
Income from continuing operations
Income from discontinued operations
Net income per share
Cash dividends declared per Common Share
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
40,808
7,967
790
8,757
0.14
0.02
0.16
0.14
0.02
0.16
0.21
$
$
$
$
$
$
$
$
41,085
8,893
591
9,484
0.16
0.01
0.17
0.16
0.01
0.17
0.21
$
$
$
$
$
$
$
$
44,102
7,576
4,675
12,251
0.14
0.08
0.22
0.14
0.08
0.22
0.23
June 30,
2012
September 30,
2012
December 31,
2012
28,257
5,612
1,227
6,839
0.12
0.03
0.15
0.12
0.03
0.15
0.18
$
$
$
$
$
$
$
$
29,580
6,242
1,339
7,581
0.13
0.03
0.16
0.13
0.03
0.16
0.18
$
$
$
$
$
$
$
$
31,817
8,440
12,836
21,276
0.17
0.25
0.42
0.17
0.25
0.42
0.18
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
42,291
9,590
33
9,623
0.18
—
0.18
0.18
—
0.18
0.21
March 31,
2012
$
$
$
$
$
$
$
$
25,333
3,325
685
4,010
0.08
0.01
0.09
0.08
0.01
0.09
0.18
F-44
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. Commitments and Contingencies
Under various Federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or
previous owner or operator of real estate may be liable for the cost of removal or remediation of certain hazardous or toxic
substances disposed, stored, generated, released, manufactured or discharged from, on, at, under, or in a property. As such, the
Company may be potentially liable for costs associated with any potential environmental remediation at any of its formerly or
currently owned properties.
The Company conducts Phase I environmental reviews with respect to properties it acquires. These reviews include an investigation
for the presence of asbestos, underground storage tanks and polychlorinated biphenyls (PCBs). Although such reviews are intended
to evaluate the environmental condition of the subject property as well as surrounding properties, there can be no assurance that
the review conducted by the Company will be adequate to identify environmental or other problems that may exist. Where a Phase
II assessment is so recommended, a Phase II assessment is conducted to further determine the extent of possible environmental
contamination. In all instances where a Phase I or II assessment has resulted in specific recommendations for remedial actions,
the Company has either taken or scheduled the recommended remedial action. To mitigate unknown risks, the Company has
obtained environmental insurance for most of its properties, which covers only unknown environmental risks.
The Company believes that it is in compliance in all material respects with all Federal, state and local ordinances and regulations
regarding hazardous or toxic substances. Management is not aware of any environmental liability that it believes would have a
material adverse impact on the Company’s financial position or results of operations. Management is unaware of any instances
in which the Company would incur significant environmental costs if any or all properties were sold, disposed of or abandoned.
However, there can be no assurance that any such non-compliance, liability, claim or expenditure will not arise in the future.
The Company is involved in various matters of litigation arising in the normal course of business. While the Company is unable
to predict with certainty the amounts involved, the Company’s management and counsel are of the opinion that, when such litigation
is resolved, the Company’s resulting liability, if any, will not have a significant effect on the Company’s consolidated financial
position, results of operations, or liquidity. The Company's policy is to accrue legal expenses as they are incurred.
During August 2009, the Company terminated the employment of a former Senior Vice President (the "Former Employee") for
engaging in conduct that fell within the definition of "cause" in his severance agreement with the Company. Had the Former
Employee not been terminated for "cause," he would have been eligible to receive approximately $0.9 million under the severance
agreement. Because the Company terminated him for "cause," it did not pay the Former Employee any severance benefits under
the agreement. The Former Employee has brought a lawsuit against the Company in New York State Supreme Court (the "Court"),
alleging breach of the severance agreement. Depositions have been completed and a trial date has been set. The Court has granted
the Company's request to file a motion for summary judgment. The suit is in the pre-trial discovery stage. The Company believes
it has meritorious defenses to the suit.
In connection with Phase 2 of the City Point Project, Albee Development LLC ("Albee"), and a non-affiliated construction manager
have been served with a Summons With Notice by Casino Development Group, Inc. ("Casino"), the former contractor responsible
for the excavation and concrete work at the City Point Project. Albee terminated the contract with Casino for cause prior to
completion of the contract. The plaintiff is seeking approximately $8.5 million. Albee believes that it has meritorious defenses to,
and is prepared to vigorously defend itself against the claims. As the case is in the beginning stage of litigation, the outcome of
these claims cannot be estimated at this time.
23. Subsequent Events
During January 2014, the Company completed the acquisition of 11 E. Walton in Chicago, Illinois, for a purchase price of $44.0
million.
During January 2014, the Company received payment on two outstanding notes receivable with an aggregate carrying amount of
$7.2 million.
During January 2014, the Company drew down $45.0 million on a previously unfunded mortgage loan collateralized by a property.
During February 2014, the Company completed the acquisition of 61 Main Street in Westport, Connecticut for a purchase price
of $7.3 million.
F-45
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2013
Initial Cost
to Company
Amount at which
Carried at December 31, 2013
Buildings &
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition
(a)
Construction
(c)
Description
Encumbrances
Land
505
—
190
1,664
1,691
—
799
13,369
—
—
—
—
—
—
—
4,192
10,061
8,289
11,108
1,793
3,229
878
3,156
—
—
—
—
—
—
—
Shopping Centers
Core Portfolio:
Crescent Plaza
Brockton, MA
New Loudon Center
Latham, NY
Mark Plaza
Edwardsville, PA
Plaza 422
Lebanon, PA
Route 6 Mall
Honesdale, PA
Bartow Avenue
Bronx, NY
Amboy Road
Staten Island, NY
Abington Towne Center
Abington, PA
Bloomfield Town Square
Bloomfield Hills, MI
Walnut Hill Plaza
Woonsocket, RI
Elmwood Park Shopping
Center
Elmwood Park, NJ
Merrillville Plaza
Hobart, IN
Marketplace of Absecon
Absecon, NJ
Clark Diversey
Chicago, IL
Chestnut Hill
Philadelphia, PA
Third Avenue
Bronx, NY
Hobson West Plaza
Naperville, IL
Village Commons
Shopping Center
Smithtown, NY
Town Line Plaza
Rocky Hill, CT
Branch Shopping Center
Smithtown, NY
Methuen Shopping
Center
Methuen, MA
The Gateway Shopping
Center
South Burlington, VT
330 River Street
Cambridge, MA
Rhode Island Place
Shopping Center
Washington, D.C.
Mad River Station
Dayton, OH
$
16,747
$
1,147
$
7,425
$
1,390
$
1,147
$
8,815
$
9,962
$
6,629
1993
(a)
17,088
17,593
12,687
1993
(a)
4,161
4,268
3,004
12,927
(872)
2,309
505
—
190
3,396
3,396
5,313
5,503
—
12,171
1,664
12,171
13,835
5,803
11,909
3,197
627
1,691
6,430
8,121
2,330
2,216
—
799
14,239
14,239
5,413
6,212
2,725
4,647
7,161
2,109
3,558
2,934
1993
(c)
1993
(c)
1994
(c)
2005
(c)
2005
(a)
1998
(a)
3,207
13,774
20,828
3,207
34,602
37,809
13,625
1998
(a)
22,910
3,122
12,488
441
3,122
12,929
16,051
6,188
1998
(a)
32,744
3,248
12,992
15,715
3,798
28,157
31,955
14,426
1998
(a)
25,837
4,288
17,152
4,993
4,288
22,145
26,433
—
2,573
10,294
4,897
2,577
15,187
17,764
2,773
5,691
8,038
7,172
246
10,061
3,019
13,080
4,234
8,289
9,925
18,214
4,380
11,855
11,671
23,526
1,833
1,793
9,005
10,798
12,917
4,048
3,229
16,965
20,194
3,510
7,508
907
10,989
11,896
12,545
8,665
3,401
20,965
24,366
956
3,826
594
961
4,415
5,376
1,940
1998
(a)
19,746
1,273
4,088
3,510
5,091
2,886
—
3,510
2,886
6,396
12,253
1,273
17,344
18,617
6,932
1999
(a)
17,086
7,458
15,968
9
7,458
15,977
23,435
—
2,350
9,404
1,049
2,350
10,453
12,803
4,252
1999
(a)
F-46
8,482
6,064
657
1,652
1,545
3,978
7,237
8,479
6,150
1998
(a)
1998
(a)
2006
(a)
2006
(a)
2006
(a)
1998
(a)
1998
(a)
1998
(a)
1998
(a)
157
684
2012
(a)
2012
(a)
Initial Cost
to Company
Amount at which
Carried at December 31, 2013
Buildings &
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition
(a)
Construction
(c)
Description
Encumbrances
Land
Shopping Centers
Pacesetter Park Shopping
Center
Ramapo, NY
239 Greenwich Avenue
Greenwich, CT
West Shore Expressway
Staten Island, NY
West 54th Street
Manhattan, NY
Acadia 5-7 East 17th
Street
Manhattan, NY
West Diversey 651-671
W Diversey Chicago, IL
Mercer Street
15 Mercer Street New
York, NY
4401 White Plains
Bronx, NY
Chicago Street Retail
Portfolio
1520 Milwaukee Avenue
Chicago, IL
Cambridge LLC
Cambridge, MA
930 Rush Street
Chicago, IL
28 Jericho Turnpike
Westbury, NY
181 Main Street
Westport, CT
83 Spring Street
Manhattan, NY
60 Orange Street
Bloomfield, NJ
179-53 & 1801-03
Connecticut Avenue
Washington, D.C.
639 West Diversey
Chicago, IL
664 North Michigan
Chicago, IL
8-12 E. Walton
Chicago, IL
3200-3204 M Street
Washington, DC
868 Broadway
Manhattan, NY
313-315 Bowery
Manhattan, NY
120 West Broadway
Manhattan, NY
Brandywine Town
Center
Wilmington, DE
Brandywine Market
Square
Wilmington, DE
Undeveloped Land
ARLP
Fund I:
Kroger/Safeway
Various
Fund II:
Liberty Ave
Ozone Park, NY
11,530
1,475
5,899
2,199
1,475
8,098
9,573
26,000
1,817
15,846
549
1,817
16,395
18,212
3,380
13,554
(55)
3,380
13,499
16,879
16,699
18,704
677
16,699
19,381
36,080
7,281
17,256
2,483
5,054
77
3,048
7,358
10,406
8
7
8,576
17,264
25,840
1,887
2,490
4,377
—
1,581
5,054
6,635
—
—
—
—
—
3,048
8,576
1,887
6,263
1,581
3,384
6,125
2,587
3,180
1,135
1,115
155
295
1999
(a)
1998
(a)
2007
(a)
2007
(a)
2008
(a)
2011
(a)
2011
(a)
2011
(a)
15,984
18,521
55,627
1,335
18,559
56,924
75,483
2,225
2011
(a)
—
2,110
1,306
7,036
4,894
11,349
—
4,933
14,587
16,164
6,220
24,416
—
—
1,908
1,754
12,158
9,200
8,457
3,609
10,790
—
—
—
—
—
—
—
2,110
4,894
4,933
6,220
1,908
1,754
3,609
1,306
3,416
11,349
16,243
14,587
19,520
82
551
638
2012
(a)
2012
(a)
2012
(a)
24,416
30,636
1,014
2012
(a)
12,158
14,066
9,200
10,954
10,790
14,399
334
345
372
307
158
2012
(a)
2012
(a)
2012
(a)
2012
(a)
2012
(a)
—
11,690
10,135
463
11,689
10,599
22,288
4,685
4,429
6,102
279
4,429
6,381
10,810
—
—
—
—
—
—
17,320
69,280
5,625
2,950
3,375
—
—
16,875
8,850
10,125
5,516
37,000
—
2
—
—
—
—
17,320
69,280
86,600
1,443
2013
(a)
5,625
2,950
3,375
—
—
16,877
22,502
8,850
11,800
10,125
13,500
5,516
5,516
37,000
37,000
211
111
—
—
—
2013
(a)
2013
(a)
2013
(a)
2013
(a)
2013
(a)
141,825
21,993
87,988
16,019
24,214
101,786
126,000
25,911
2003
24,375
4,308
17,239
—
—
4,215
—
50,000
—
9,090
250
—
—
—
957
—
—
—
4,262
250
—
—
—
18,242
22,504
5,412
2003
—
—
250
—
—
—
4,215
4,215
4,022
2003
(a)
13,819
13,819
2,229
2004
(a)
12,627
1,192
F-47
Initial Cost
to Company
Amount at which
Carried at December 31, 2013
Buildings &
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition
(a)
Construction
(c)
Description
Encumbrances
Land
Shopping Centers
216th Street
New York, NY
161st Street
Bronx, NY
Fund III:
Cortlandt Towne Center
Mohegan Lake, NY
Heritage Shops
Chicago, IL
654 Broadway
Manhattan, NY
New Hyde Park
Shopping Center
New Hyde Park, NY
640 Broadway
Manhattan, NY
Lincoln Park Centre
Chicago, IL
3104 M Street
Washington, D.C.
3780-3858 Nostrand Ave
Farmingdale, NY
Fund IV:
210 Bowery LLC
New York, NY
Paramus Plaza
Paramus, NJ
1151 Third Ave
Manhattan, NY
Lake Montclair
Prince William County,
VA
938 W. North Avenue
Chicago, IL
Acadia Strategic
Opportunity Fund IV
Real Estate Under
Development
25,500
7,261
—
19,198
7,261
19,198
26,459
29,500
16,679
28,410
18,219
16,679
46,629
63,308
3,537
7,777
2005
(a)
2005
(a)
84,745
7,293
61,395
5,688
7,293
67,083
74,376
14,777
2009
(a)
20,871
13,131
15,409
382
13,131
15,791
28,922
1,469
2011
(a)
—
9,040
3,654
956
9,040
4,610
13,650
6,294
3,016
7,733
3,991
3,016
11,724
14,740
22,750
12,503
19,960
3,219
12,503
23,179
35,682
23,000
5,090
25,353
125
5,090
25,478
30,568
—
750
2,251
95
750
2,346
3,096
12,567
5,058
14,585
510
5,058
15,095
20,153
4,600
1,875
5,625
—
—
—
—
4,703
5,400
4,813
5,000
14,148
12,600
14,438
15,000
68,750
—
—
38
—
—
9
—
—
1,875
4,703
5,400
4,813
5,000
—
5,663
7,538
14,148
18,851
12,600
18,000
14,447
19,260
15,000
20,000
—
—
262,912
45,658
2,564
289,131
45,658
291,695
337,353
205
541
1,023
1,123
80
334
140
118
53
60
62
—
—
2011
(a)
2011
(a)
2012
(a)
2012
(a)
2012
(a)
2013
(a)
2012
(a)
2013
(a)
2013
(a)
2013
(a)
2013
(a)
2012
(a)
2012
(a)
Total
$
1,039,617
$378,117
$
950,875
$
490,061
$381,909
$
1,437,144
$1,819,053
$
229,538
Notes:
(1) Depreciation on buildings and improvements reflected in the consolidated statements of income is calculated over the
estimated useful life of the assets as follows:
Buildings: 30 to 40 years
Improvements: Shorter of lease term or useful life
(2) The aggregate gross cost of property included above for Federal income tax purposes was $1,491.0 million as of December
31, 2013
(3) (a) Reconciliation of Real Estate Properties:
The following table reconciles the activity for real estate properties from January 1, 2011 to December 31, 2013:
F-48
(dollars in thousands)
Balance at beginning of year
Other improvements
Property Acquired
Consolidation of Previously Unconsolidated Investments
For the years ended December 31,
2011
2012
2013
753,989
897,370
$ 1,287,198
37,497
112,622
65,480
105,884
324,348
272,661
—
—
146,572
$
$
Balance at end of year
$ 1,819,053
$ 1,287,198
$
897,370
(3) (b) Reconciliation of Accumulated Depreciation:
The following table reconciles accumulated depreciation from January 1, 2011 to December 31, 2013:
(dollars in thousands)
Balance at beginning of year
Depreciation related to real estate
Consolidation of Previously Unconsolidated Investments
$
For the years ended December 31,
2012
2013
2011
147,626
169,718
22,092
31,732
—
28,088
134,530
13,096
—
$
$
Balance at end of year
$
229,538
$
169,718
$
147,626
F-49